American Elephants


Taxpayers Will Lose Big on the GM Bailout. by The Elephant's Child

The long sorry saga of the General Motors bailout is coming to an end. General Motors is buying back 200 million shares of its stock from the government, or about 40% of the government’s holdings of GM stock. The remaining 300 million shares will be sold by March 2014.

By selling the stock and putting GM back in business, the federal governments’ “investment” was a great success, was it not?  Not. We were told repeatedly that the GM bailout would not only save jobs, but it might even end up netting the taxpayers a profit.

GM on Wednesday said it will buy back the 200 million share of the government stake for $5.5 billion, or $27.50 a share. Unfortunately the break even point on the government’s total holdings was $53 a share. Now, with $20.9 billion in taxpayer funds left to pay off from the remaining 300 million shares, the break-even point has risen to $69.72 a share.

Back in October, President Obama was bragging about the big comeback of General Motors.

When the American auto industry was on the brink of collapse, I said, let’s bet on America’s workers. And we got management and workers to come together, making cars better than ever, and now GM is No.1. again and the American auto industry has come roaring back.

That’s a valiant attempt to make a silk purse out of a sow’s ears, but it is a poke of exaggerations, half-truths and deceptions — yet it helped to secure Obama’s re-election.

In the 1950s GM owned roughly half of the U.S.car market. By 2006, just before the financial crisis, its market share had fallen to about 24%. In March of this year, according to Ward’s Auto Reports, it hit an all-time low of 16.5 %. Not roaring back, and not exactly No. 1. The nonunion transplants like Hyundai and VW are growing much faster.

As for Obama’s bailout of American workers, it was a taxpayer giveaway to the United Auto Worker’s Union that allied with sloppy management bears the blame for the ills of the auto industry. The $80 billion auto bailout gave the UAW nearly $27 billion because GM could not shed its overly expensive labor contracts, something it could have done in a normal, legal bankruptcy. Obama bailed out the unions, not the auto industry

The UAW and its affiliates give tens of millions of dollars each election cycle, almost entirely to Democrats. Which explains why Obama’s auto czars arranged a government “bankruptcy” for GM flew in the face of hundreds of years of bankruptcy law and violated investor rights. Bondholders took huge losses, while unions got a big chunk of ownership in GM stock to which they had no legal right.

UAW workers at GM kept their pensions as well, but nonunion workers at GM spin-off Delphi lost theirs. This is a Chicago style bailout in which corporate cronies of the Obama White House pocket taxpayer “subsidies” and “green investments”, give executives a raise, and then go belly up. That’s what happens when the spenders think of revenue as “government money” which they are free to distribute in any way that gathers in future votes.

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