Americans Will Get Their Money Back with GM IPO

[Lostlover]

The American taxpayer will probably get all his (or her for Iman ) money back, plus some after the bailout of GM.

Obama's bailout plan was panned by conservatives that called it an offense to the free market. Obama actually made the bailout conditional on a restructuring. Yet, Bush gives money with no conditions and it's okay.


http://www.nytimes.com/2010/08/19/business/19auto.html


This is great news for Obama. They really need to sell this to the public.

 

[MoltenRock III]

The same goes for TARP money that lent money to the banks. The American taxpayer will actually make a profit on this, as they should. AIG, and the fraudulent behavior there, means I doubt the taxpayer will be able to recover all the billions put into it. Hopefully, though.

 

[rareboy]

We're looking forward to getting all our cash for clunker GM shares back in Canada too.

The part that smarts for us shareholders who lost all our money in GM the last time around is that the boys who created the mess, including Wall Street, will make another fortune in flogging the IPO and convincing widows and orphans to invest in the company again.

My guess is, it will keep showing a profit until after the IPO and then we'll return to chronic losses again.

It isn't on my 'buy' list.

 

[MoltenRock III]

I should add that this means GM will now be a global powerhouse again for manufacturing vehicles. America needs some strong exporting companies like Cargill, Mead Westvaco Paper, Weyerhauser, CellMark Paper, International Paper, and others.

GM will be selling more cars and trucks in China than it does in the United States. More and more, GM, Ford, and other companies will become increasingly tied to China and its economy than the USAs. The USA peaked in economic strength under the Clinton years. I doubt that level will ever return to the USA to companies that don't export to China.

Additionally, the Chinese car companies have their eyes set on North America. Trust me, they are coming and it won't be pretty for a few weak car companies. *Chrysler I'm looking at you.*

By the way, China this week has been reported to now be the world's 2nd largest economy, displacing Japan to #3. By 2030, China will be the largest economy on Earth.

 

[MoltenRock III]

My guess is, it will keep showing a profit until after the IPO and then we'll return to chronic losses again.

It isn't on my 'buy' list.

GM has shaved billions of $$$ from it's annual cost structure. It will be one of the few remaining global car companies when its all said and done. I'm hopeful about Ford, but they have so much debt since they financed their own turnaround, its anyone's guess.

Also, their legacy healthcare costs and retiree pensions which were the most crushing of all, literally fixes itself in the coming years as those people die off. (Yes, it sounds harsh but is a reality.) Secondly, they spun the healthcare costs off to the union, for them to deal with. GM is only about 1/3 the total size it was employee wise, than at its peak. I think before the bankruptcy filing GM's legacy costs added almost $3,000 to the price of its cars, and why it couldn't make any money.

 

[Kulindahr]

The American taxpayer will probably get all his (or her for Iman ) money back, plus some after the bailout of GM.

Obama's bailout plan was panned by conservatives that called it an offense to the free market. Obama actually made the bailout conditional on a restructuring. Yet, Bush gives money with no conditions and it's okay.


http://www.nytimes.com/2010/08/19/business/19auto.html

This is great news for Obama. They really need to sell this to the public.

I don't see your opening claim backed up in the article. In fact, there's nothing in it that says the taxpayers will get any money back at all, because the Treasury hasn't committed to selling any of the GM stock it holds -- there's just an expectation.

 

[JB3]

The American taxpayer will probably get all his (or her for Iman ) money back, plus some after the bailout of GM.

Obama's bailout plan was panned by conservatives that called it an offense to the free market. Obama actually made the bailout conditional on a restructuring. Yet, Bush gives money with no conditions and it's okay.


http://www.nytimes.com/2010/08/19/business/19auto.html


This is great news for Obama. They really need to sell this to the public.

How exactly did you draw that conclusion from this article? Nowhere does it say that "The American taxpayer will probably get all his (or her for Iman ) money back, plus some after the bailout of GM."

The most GM's IPO will generate is $16 billion dollars. And that's being optimistic. In all likelihood, it will generate less, because investors are still very wary of investing in a company that still hasn't proven itself to be viable. There are also two classes of shares: Common shares (which are what the government owns, and the profit of which will go directly to the government) and Preferred shares, which will go STRAIGHT into GM's coffers.

You also missed this very critical line of the story:

For the government to fully recover its investment in G.M., the Treasury Department would have to sell its 304 million shares at an average price of about $141 each.

That's not going to happen. Ever. Toyota's stock is hovering right around $70, Ford is at $12, Honda is at $32, Daimler is at $52, and BMW is at $43.

Which is then followed by this a bit further down the page:

The Treasury is expected to sell enough stock in the initial offering to bring its overall ownership position in G.M. below 50 percent — freeing the automaker of the stigma of being called “Government Motors,” which executives have said is hurting its reputation in the marketplace. G.M.’s 734-page filing said taxpayers would “continue to own a substantial interest in us following this offering.”

The government owns 61% of GM right now. Let's say they get that down to 41% with this sale. That would mean that they would still own a majority of their shares, and will in no way make anything resembling 'all of their money back'.

The bailout plan for GM was an idiotic waste of money. GM's problems didn't just happen overnight, and it wasn't something that their management couldn't have seen coming. To put it bluntly, GM saw what was coming and exploited the crisis to get itself out of its tough spot. Their management didn't understand then, and still doesn't understand now, how to run a major manufacturing operation in this day and age, and compete against companies like Toyota, Honda, and Ford. They refused to do what was needed before the crisis, refused to do it during, and are refusing to do it now.

Don't be surprised to see GM start losing money sooner rather than later...

 

[Kulindahr]

^
Excellent post!

 

[MoltenRock III]

Don't be surprised to see GM start losing money sooner rather than later...

Your nonsense on share prices on other companies is ridiculous. Price is based on outstanding shares. Comparing share prices as a way to say one company is "better" or "worse" than another, is extreme naiveté.

I reread all the quotes from Dec. 2008 the other week when I rejoined. I laughed my ass off at how wrong all the GM haters were and still are. Why do they think they actually know anything?

Oh, by the way JB3/Droid800 you said this exactly 1 year ago yesterday:

"Unless the production uptick is sustained, it means nothing. In all likelihood, they're going to overstuff their retail channels like they did before, and will shut down their plants for months, like they did for most of the summer."

None of this came to pass. Go figure.

 

[evanrick]

Conservatives said that GM was a lost cause and that the Wall Street Bail out made more sense. It turns out the opposite is true, but they were both "bad" investments.

 

[JB3]

Your nonsense on share prices on other companies is ridiculous. Price is based on outstanding shares. Comparing share prices as a way to say one company is "better" or "worse" than another, is extreme naiveté.

I reread all the quotes from Dec. 2008 the other week when I rejoined. I laughed my ass off at how wrong all the GM haters were and still are. Why do they think they actually know anything?

Oh, by the way JB3/Droid800 do you remember saying this exactly 1 year ago yesterday?

"Unless the production uptick is sustained, it means nothing. In all likelihood, they're going to overstuff their retail channels like they did before, and will shut down their plants for months, like they did for most of the summer."

None of this came to pass. Go figure.

If you honestly think that GM was a healthy company, or did not see its demise coming, you're more dense than I thought. We're talking about a company that lost $88 billion dollars in four and a half years. We're talking about a company that was so devoid of leadership that they pumped billions into brands that they later killed (at a certainly substantial loss). GM was mismanaged. It did not deserve to be saved by US taxpayers.

If you had read the post, instead of just scanning it (as you clearly did) you would understand the comparison in share price was for the numbers provided in the article. There is no way in hell that GM's stock will be valued at $141 per share. Ever. Its just not going to happen.

And FYI; GM DID shut down plants. Instead of being temporary, however, it was permanent.

http://www.insideline.com/car-news/...e-more-us-plants-affecting-10000-workers.html

And GM's sales for September, October, November, and so on, were down severely after that initial production uptick. You're right, I was wrong about them stuffing their channels. They didn't do it because the plants that they could do it with were closing permanently and GM was shipping the production tooling to other plants (some of which were on other continents).

 

[JB3]

Conservatives said that GM was a lost cause and that the Wall Street Bail out made more sense. It turns out the opposite is true, but they were both "bad" investments.

GM WAS a lost cause. The fact that it couldn't even make it to bankruptcy (or through it, for that matter) is evidence enough of that fact.

 

[CowboyBob]

Yeah. Imagine the shit we would be in if General Motors and Chrysler went under. The car companies, their suppliers, the dealerships, etc. The domino effect would have been in the millions of jobs lost. Even more Americans on the welfare rolls and less taxpayers.

General Motor's problem is their design-by-committee cars. They introduce a boring car designed by the bean counters and let it languish, then years later wonder why they it isn't selling. Once they get a car guy in the drivers seat instead of businessmen to design vehicles people want to buy, they'll be alright. They did this in the 1950's and 1960's and at one time GM had 55% of the American market.

Chrysler was raped and pillaged, first by Daimler and secondly by Cerberus Capital Management. They were a highly successful wealthy small company in the 1990's when they were taken over by larger ailing Daimler-Benz. Daimler grabbed as much of their cash as they could, then the remains were stolen by Cerberus. At the shareholders meetings, product wasn't even mentioned as they tried to wring out the last few dollars off Chrysler's carcass. Their dying corpse is supposed to be brought back to life with the Fiat merger and there are signs it will as long as the economy improves.

I'm glad the companies received their bridge loans and eventually they'll be paid off. It will take a while but they will. The spiraling downward economy of 2 to 3 years ago while Bush was in office almost killed off the auto industry, and we need a viable industry for national security purposes also. We get enough of our products from Asia. We don't need to get everything.

 

[jackoroe]

Bailing them out was still a bad idea. We've now propped up two car companies that were unable to produce a product that people wanted to buy. It's also Chrysler's second visit to the trough. They took government money in the early '80's because their cars sucked even back then.

Chrysler is still likely to fail. Fiat isn't exactly a model of corporate efficiency. GM may hobble along, significantly smaller than it once was. I'm sure it's only a coincidence that the IPO will be close to election time.

 

[jackoroe]

And we're still inundated with toxic mortgages, which was the proximate cause of this whole disaster. Home foreclosures are still at near record levels. Wasn't TARP supposed to address that issue?

 

[Kulindahr]

Bailing them out was still a bad idea. We've now propped up two car companies that were unable to produce a product that people wanted to buy. It's also Chrysler's second visit to the trough. They took government money in the early '80's because their cars sucked even back then.

Chrysler is still likely to fail. Fiat isn't exactly a model of corporate efficiency. GM may hobble along, significantly smaller than it once was. I'm sure it's only a coincidence that the IPO will be close to election time.

Don't forget the whole picture: in the 80s, Chrysler was taken in hand by a practical engineer who not only brought it back, but paid of the government loan ahead of schedule.

I'd say the lesson there is to put creative people who know the business from a hands-on level in charge.

 

[CowboyBob]

Bailing them out was still a bad idea. We've now propped up two car companies that were unable to produce a product that people wanted to buy. It's also Chrysler's second visit to the trough. They took government money in the early '80's because their cars sucked even back then.

Chrysler is still likely to fail. Fiat isn't exactly a model of corporate efficiency. GM may hobble along, significantly smaller than it once was. I'm sure it's only a coincidence that the IPO will be close to election time.

Bailing them out was a bad idea? So it was a bad idea to save the domestic automobile industry and millions of direct and indirect jobs attached to the auto industry.

Chrysler is still struggling, but they finally shook off the parasites which got them into this mess and are finally focusing on product which they haven't done for a decade. They're introducing vehicles that people will actually want to buy in a product blitz for the next three years and are coming out with 24 new vehicles. Newness sells. Allowing products to languish over years is company suicide, and they've vowed not to let that happen again.

Their bailout in the Lee Iacocca years was a completely different situation than it was now. During their renaissance as an independent company in the early 1990's they were the envy of the industry and was flush with cash. Their doom was being a small wealthy company which made them ripe for takeover. The Fiat merger has it's pros and cons, but it was necessary. I believe they will survive.

 

[Kulindahr]

^ I tend to agree. The big difference to me is that Chrysler is actively doing something, while GM just muddles about. I haven't really paid much attention to Ford, so I won't make any assessment there.

 

[JB3]

^ I tend to agree. The big difference to me is that Chrysler is actively doing something, while GM just muddles about. I haven't really paid much attention to Ford, so I won't make any assessment there.

Ford is now on par with Toyota in most aspects. They went from having seven brands that required funding to now having just two. They've been smart with manufacturing, to the point that most of their plants rival Toyota in efficiency and quality. Yes, they have debt, but they're paying it off, and being very proactive about keeping that debt in focus without letting it affect product.

 

[Kulindahr]

^ Tanks for the summary.