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They've got $5bn in cash to do this? Even if they spread it out over a year, that's still a lot of money from their operating fund.

Chip H.
 

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Never said cars. The fact that GM has $% Billion to do something like this is a complete surprise to me.
The company said that it plans to make sure it always has $20 billion in cash to weather any future downturns in the auto business and added that it did not think any of the credit rating agencies would change their outlook for GM"s debt.
I'm surprised they have that kind of cash too.
 

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Well GM net income for 2013 was $900 million, and 2014 was $1.1 billion so there's $2 billion in the last 24 months. They also say they have $20 - $25 billion cash on hand.

They plan to raise their dividend by 20%. Gave their 48,000 union employees up to $9,000 in bonuses.

That all sounds pretty good, but their stock price dropped 3% last year.
 

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Well GM net income for 2013 was $900 million, and 2014 was $1.1 billion so there's $2 billion in the last 24 months. They also say they have $20 - $25 billion cash on hand.

They plan to raise their dividend by 20%. Gave their 48,000 union employees up to $9,000 in bonuses.

That all sounds pretty good, but their stock price dropped 3% last year.
Too bad they can't take the morale high ground & pay back some of those bond holders that got screwed in the bail-out! As time passes the world will pretend that the GM bail-out deal was honest, just, and above board. Nothing could be farther from the truth. This is like a blind eye to Al Capone back in the bad old days, because he spread around the benefit to those who supported him. Robbing Peter to pay Paul is a popular political ploy these days.

http://www.dailywealth.com/2125/gm-americas-biggest-bankruptcy
and
https://answers.yahoo.com/question/index?qid=20120810101653AAMBcxF
 

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Too bad they can't take the morale high ground & pay back some of those bond holders that got screwed in the bail-out! As time passes the world will pretend that the GM bail-out deal was honest, just, and above board. Nothing could be farther from the truth. This is like a blind eye to Al Capone back in the bad old days, because he spread around the benefit to those who supported him. Robbing Peter to pay Paul is a popular political ploy these days.

http://www.dailywealth.com/2125/gm-americas-biggest-bankruptcy
and
https://answers.yahoo.com/question/index?qid=20120810101653AAMBcxF
I'm all too well aware of what happened to the "preferred" and "secured" debt holders of both GM and Chrysler. I know too many people and families with ruined lives by the fiasco. What happened is illegal, but there's nothing any of us can do about it now.

There are many other very bad things that happened during that period. There were no provisions with the loans that the jobs would stay in the USA. I'll use this example: In St. Louis, MO Chrysler had two assembly plants. One built the Chrysler minivans, and the other built the Dodge (now RAM) pickup trucks. With the two plants and the supplier jobs in the area there were about 60,000 people working to support those two plants. Once Chrysler got the money they moved the minivan production to Canada, and the pickup truck production to Mexico. Both St. Louis plants had much better vehicle build quality ratings than the plants that actually got the jobs. They abandoned the 4+ million square feet of assembly plants to die in the bankruptcy. The buildings were torn down and sold for scrap. Today the area is nothing more than two giant abandoned concrete slabs (they didn't want to tear up the concrete because they knew they'd find all kinds of hazardous waste). All because some politicians didn't have the balls to say, "if we give you this money you keep the jobs here".

The above is only one example. The REAL costs of those bankruptcies and bail-outs cannot be calculated.
 

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A yearly stock price variance of 3% in today's stock world isn't even a burp in the line.

GM bonds were junk rated years before the managed bankruptcy. The company was mismanaged for years before that. I have zero sympathy for those investors, both individual and institutional, who looked to profit from the junk with a high rate of return. What normal bonds return 8+%? Risk and reward. There's no magic bullet to making money. 80% of the debt was institutionally owned...Hedge funds, looking to turn a quick buck, were a chunk of the 80%

The managed bankruptcy and it's result was the only way to go given the situation. A normal bankruptcy proceeding would have been catastrophic to the entire car indusrtry, and economy. I'll bet a fine meal Honda didn't want to see that either from a supply chain standpoint. Lawyers would have dragged it out for a couple years and profited $100s of millions of dollars. (ie United Airlines in 2002...over 3 years and $335 million in lawyer/consultant fees)

I owned and sold GM stock for a little profit before the bottom fell out. I bought it again at the IPO. I'm happy with the coming dividend. Most here believe in personal accountability. Investors led down the trail to a quick buck on a junk bond have no one to blame but themselves. They didn't do their DD and they guessed wrong. Even then, they didn't take a full haircut as many here seem to think.
 

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A yearly stock price variance of 3% in today's stock world isn't even a burp in the line.

GM bonds were junk rated years before the managed bankruptcy. The company was mismanaged for years before that. I have zero sympathy for those investors, both individual and institutional, who looked to profit from the junk with a high rate of return. What normal bonds return 8+%? Risk and reward. There's no magic bullet to making money. 80% of the debt was institutionally owned...Hedge funds, looking to turn a quick buck, were a chunk of the 80%

The managed bankruptcy and it's result was the only way to go given the situation. A normal bankruptcy proceeding would have been catastrophic to the entire car indusrtry, and economy. I'll bet a fine meal Honda didn't want to see that either from a supply chain standpoint. Lawyers would have dragged it out for a couple years and profited $100s of millions of dollars. (ie United Airlines in 2002...over 3 years and $335 million in lawyer/consultant fees)

I owned and sold GM stock for a little profit before the bottom fell out. I bought it again at the IPO. I'm happy with the coming dividend. Most here believe in personal accountability. Investors led down the trail to a quick buck on a junk bond have no one to blame but themselves. They didn't do their DD and they guessed wrong. Even then, they didn't take a full haircut as many here seem to think.
If you believe in personal accountability, you should believe in corporate accountability. "was the only way to go" is what they sold, and it is what you bought... along with many other smart people. Sadly, there is no way to know now. You can bet your fine meal however you like, but I'd bet the same that if GM was to suffer it's own rewards (sunk, gone, etc.) due to the mismanagement that you readily concede, then the better managed corporations would have quickly filled the void. AND if a few members of that corporate leadership were held accountable, including jail if that's what was called for, then there would have been a lesson learned which has been totally missed. Is there any motivation for the same thing to not happen again?? Absolutely not. There should be consequences for actions, both personal & corporate; and using the extortionist argument that "others will be hurt" does not justify the tolerance, perpetuation & even rewarding of bad corporate behavior. How many of those same clowns at GM are still at the wheel??? The American Tax Payers lined their pockets before & foolish American consumers continue to line their pockets now. The only survivors of that fiasco should have been those companies who managed well enough to survive & garner the hard lessons learned. Instead, the most foolish garner the greatest benefit.
Would it have been an ugly period of transition & adjustment? Yes, absolutely. Would market forces have equalized things in the end? Yes, absolutely. Could the Gov't provide the social "safety net" warranted for out of work individuals? Yes... and for a lot less than they spent on GM.
It provided a 'wrong' lesson for everyone. Sad Story from my standpoint. But that's just one opinion.

BTW, I wouldn't condone "bail-out" of bond holders at all under normal circumstances of the company gone south.... but to bail out the company & it's rightly accountable leadership, but not those who provided it's financial foundation is ludicrous. And WHY the union???? No logic there... only political patronage.
 

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If you believe in personal accountability, you should believe in corporate accountability. "was the only way to go" is what they sold, and it is what you bought... along with many other smart people. Sadly, there is no way to know now. You can bet your fine meal however you like, but I'd bet the same that if GM was to suffer it's own rewards (sunk, gone, etc.) due to the mismanagement that you readily concede, then the better managed corporations would have quickly filled the void. AND if a few members of that corporate leadership were held accountable, including jail if that's what was called for, then there would have been a lesson learned which has been totally missed. Is there any motivation for the same thing to not happen again?? Absolutely not. There should be consequences for actions, both personal & corporate; and using the extortionist argument that "others will be hurt" does not justify the tolerance, perpetuation & even rewarding of bad corporate behavior. How many of those same clowns at GM are still at the wheel??? The American Tax Payers lined their pockets before & foolish American consumers continue to line their pockets now. The only survivors of that fiasco should have been those companies who managed well enough to survive & garner the hard lessons learned. Instead, the most foolish garner the greatest benefit.
Would it have been an ugly period of transition & adjustment? Yes, absolutely. Would market forces have equalized things in the end? Yes, absolutely. Could the Gov't provide the social "safety net" warranted for out of work individuals? Yes... and for a lot less than they spent on GM.
It provided a 'wrong' lesson for everyone. Sad Story from my standpoint. But that's just one opinion.

BTW, I wouldn't condone "bail-out" of bond holders at all under normal circumstances of the company gone south.... but to bail out the company & it's rightly accountable leadership, but not those who provided it's financial foundation is ludicrous. And WHY the union???? No logic there... only political patronage.
I agree with what you say regarding accountability, but disagree with the means to achieve the end result. I wasn't happy about the way this went down. It was far from perfect, but was necessary at the time. For starters, there was no money in the banking system to finance the deal otherwise. ...Aside from that, time was short. It's not like cars were the only thing on the plate that could have caved the country in. You had the financial corruption (created by greedy Americans) going on and the ridiculous money being spent in Iraq where we had no business being. Our coffers were being drained in the middle of the largest recession since the 30s. No country in the history of the world has ever been able to stay strong militarily without a vibrant economy to pay for it all. What American company would have filled the void of letting the 2 of them fail? Who had the cash or would have taken the chance? ...or would it be OK for a foreign company to control one of our largest manufacturing industries? Which foreign company would that be? How about a Chinese company? They were flush at the time. National security issues? Steel producing control during a war footing? Pure market forces would allow such ownership. Survival of the fittest! Not allowing a free market transaction is meddling in the system.

Your take on how things could have worked out doesn't fit into reality IMO. The pure market force argument is a non starter with me. Pure market forces have never been in play in this country since day one. ...and they certainly aren't employed on the world stage where we move trillions of dollars of commerce both in and out of this country yearly. It's a simplistic idea and one that can never work in it's pure form because of the human frailty of greed. Greed is a necessary component of our system, but it can't be left unchecked. Market forces will not/have not always done the right thing. Even the ultimate supply sider Greenspan admitted as much when testifying before Congress. It is the huge ***** in the armor of all supply side/Libertarian thinking. ...Of course supply side theory doesn't jibe at all with a pure free market scenario.

Hedge funds (majority of GM debt) and individual investors (maybe 20%) looking to make a ridiculous return on junk bonds of a company gone south many years before is not what I call a sound financial foundation ...or one worthy of bailout. That's the trouble with Wall Street today. It has little to do with Main Street..or supporting good companies long term. It's all about the quick buck and shareholder return...however short term that thinking may be. As for the union part, I agree unions were equally complicit in the downward trend of the Big 3, but you should read a little more of how the whole thing played out. Unions were not unscathed in this. The hourly wage concessions they took in 2007 for new employees put them on a par with what Henry Ford was paying in 1914 (source: Bloomberg Business Week) Bondholders had a chance to garner more for their buck in the restructuring, but the hedge funds and institutions turned their nose at it initially. ..Not sure how it ended up.

As for being a foolish customer....Our 2014 2LTZ Impala is one of the highest rated large luxury cars CR has tested to date. It still tops the list 2 years after introduction. Our 2010 Lacrosse was also an excellent car that we drove to 61,000 miles with zero out of pocket cost. From a reliability standpoint both of these cars cost much less than our Ridgeline to own. I have $0 dollars in the GM products and over $800 (I'm fine with that) out of pocket in the RL so far. Even though I never had a bad Big 3 truck, I still don't hesitate to brag about the RL. It's a perfect fit for me. Hopefully the new one will be too as the new GM mid size may be too big for me. From a car standpoint, Honda doesn't make anything I'm interested in.

To write GM off, or think that they should be boycotted, is the foolish position IMHO. To each his own
 

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I agree with what you say regarding accountability, but disagree with the means to achieve the end result. I wasn't happy about the way this went down. It was far from perfect, but was necessary at the time. For starters, there was no money in the banking system to finance the deal otherwise. ...Aside from that, time was short. It's not like cars were the only thing on the plate that could have caved the country in. You had the financial corruption (created by greedy Americans) going on and the ridiculous money being spent in Iraq where we had no business being. Our coffers were being drained in the middle of the largest recession since the 30s. No country in the history of the world has ever been able to stay strong militarily without a vibrant economy to pay for it all. What American company would have filled the void of letting the 2 of them fail? Who had the cash or would have taken the chance? ...or would it be OK for a foreign company to control one of our largest manufacturing industries? Which foreign company would that be? How about a Chinese company? They were flush at the time. National security issues? Steel producing control during a war footing? Pure market forces would allow such ownership. Survival of the fittest! Not allowing a free market transaction is meddling in the system.

Your take on how things could have worked out doesn't fit into reality IMO. The pure market force argument is a non starter with me. Pure market forces have never been in play in this country since day one. ...and they certainly aren't employed on the world stage where we move trillions of dollars of commerce both in and out of this country yearly. It's a simplistic idea and one that can never work in it's pure form because of the human frailty of greed. Greed is a necessary component of our system, but it can't be left unchecked. Market forces will not/have not always done the right thing. Even the ultimate supply sider Greenspan admitted as much when testifying before Congress. It is the huge ***** in the armor of all supply side/Libertarian thinking. ...Of course supply side theory doesn't jibe at all with a pure free market scenario.

Hedge funds (majority of GM debt) and individual investors (maybe 20%) looking to make a ridiculous return on junk bonds of a company gone south many years before is not what I call a sound financial foundation ...or one worthy of bailout. That's the trouble with Wall Street today. It has little to do with Main Street..or supporting good companies long term. It's all about the quick buck and shareholder return...however short term that thinking may be. As for the union part, I agree unions were equally complicit in the downward trend of the Big 3, but you should read a little more of how the whole thing played out. Unions were not unscathed in this. The hourly wage concessions they took in 2007 for new employees put them on a par with what Henry Ford was paying in 1914 (source: Bloomberg Business Week) Bondholders had a chance to garner more for their buck in the restructuring, but the hedge funds and institutions turned their nose at it initially. ..Not sure how it ended up.

As for being a foolish customer....Our 2014 2LTZ Impala is one of the highest rated large luxury cars CR has tested to date. It still tops the list 2 years after introduction. Our 2010 Lacrosse was also an excellent car that we drove to 61,000 miles with zero out of pocket cost. From a reliability standpoint both of these cars cost much less than our Ridgeline to own. I have $0 dollars in the GM products and over $800 (I'm fine with that) out of pocket in the RL so far. Even though I never had a bad Big 3 truck, I still don't hesitate to brag about the RL. It's a perfect fit for me. Hopefully the new one will be too as the new GM mid size may be too big for me. From a car standpoint, Honda doesn't make anything I'm interested in.

To write GM off, or think that they should be boycotted, is the foolish position IMHO. To each his own
I'll keep this short.
1) We differ in what was "necessary". If you are willing to use gov't money to bail out & reward the failed... why can't you see that you could use that same gov't money to guarantee loans to those better managed companies to take over? You didn't need the failing banks as you suggest ... poor excuse. There was NO accountability with the solution implemented. Only lots of collateral damage to the less powerful bystanders (like dealers) so that the guilty leadership could restructure to save their butts.
I say reward the prudent & responsible... not the wasteful foolish. They gave it to the union for purely political reasons. The "old" GM did not have to play ANY part in the rebuilding of it's replacement company, whether or not you still called it GM.

2) I'm not discussing the bank failure here... that's a whole other topic. Just the GM bail-out.

3) My comment about foolish buyers of GM products is simply an extension of not wanting to reward those who screwed things up to begin with... I'm not saying anything about the quality of their current offerings. Just saying they got to where they are by being "granted" moneys that were not theirs to have.... better solutions were available that did not include rewarding those who caused the problem in the first place (GM mgmt & their union leadership). The only reason GM survived is through ENORMOUS political influence (not to mention a whole lot of destruction to a lot of vested parties who were NOT management or the union). My opinion is they all should have swung together. Only the "connected" survived, as is always the case in a corrupt enterprise. End of story.

Lessons learned are seldom easy... and if they are, there are probably no real lessons learned.
 

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I'll keep this short.
1) We differ in what was "necessary". If you are willing to use gov't money to bail out & reward the failed... why can't you see that you could use that same gov't money to guarantee loans to those better managed companies to take over? You didn't need the failing banks as you suggest ... poor excuse. There was NO accountability with the solution implemented. Only lots of collateral damage to the less powerful bystanders (like dealers) so that the guilty leadership could restructure to save their butts.
I say reward the prudent & responsible... not the wasteful foolish. They gave it to the union for purely political reasons. The "old" GM did not have to play ANY part in the rebuilding of it's replacement company, whether or not you still called it GM.

2) I'm not discussing the bank failure here... that's a whole other topic. Just the GM bail-out.

3) My comment about foolish buyers of GM products is simply an extension of not wanting to reward those who screwed things up to begin with... I'm not saying anything about the quality of their current offerings. Just saying they got to where they are by being "granted" moneys that were not theirs to have.... better solutions were available that did not include rewarding those who caused the problem in the first place (GM mgmt & their union leadership). The only reason GM survived is through ENORMOUS political influence (not to mention a whole lot of destruction to a lot of vested parties who were NOT management or the union). My opinion is they all should have swung together. Only the "connected" survived, as is always the case in a corrupt enterprise. End of story.

Lessons learned are seldom easy... and if they are, there are probably no real lessons learned.


I disagree with your entire premise and solution. You seem to be hanging your hat on a 100% market solution. That approach never has, and never will work in situations like this. If you think there was NO accountability for the solution implemented, you better read a little more

Further, giving money to a better managed company (socializing their risk) means they would need to make a profit as well. ...Kind of like the college loan nonsense we had before. ie..the government running the money through a middle man (private for profit company), but responsible for all the risk. The financial sector laughed all the way to the bank on that one...pun intended. Absolutely ridiculous! I'm also curious who a couple of these better managed companys might have been? ...The ones who would have taken over the car industry from another segment of the economy. To think that the financial sector almost collapsing, or the deep recession we were in, weren't part of the equation is just plain wrong IMO.

Ford would have been in the same boat as the other 2 if Mulally and Bill Ford hadn't mortgaged the company to the hilt when the banks still had money to give in 2006. Some $23.6 billion dollars worth, including the Ford Blue Oval. 3 years later, they never would have gotten the money. Even then, they requested and received a $9 billion dollar line of government credit. In addition, many other car companys financial arms (including Honda), were given billions of dollars in lines of credit to tide them over. They all benefited from it.

http://jalopnik.com/5704575/ford-bmw-toyota-took-secret-government-money

I actually had much less sympathy for Chrysler, who were owned by Cerberus at the time. I believe they had the financial wherewithal to fund the deficit, but chose to suckle at the trough just like GM.

This was far from the first time this has happened. The gov't has bailed critical institutions out many times over the years...going back before 1800.........from railroads to defense contractors to New York City They've bailed out private banks dozens of times. How are they any different from the auto industry? FTR, 90% of the bailouts the last 45 years occurred under Republican administrations

The auto bailout worked as intended and was successful by any economic measure. The country is much stronger today because of it.

Your view of how it should have worked just isn't connected to the facts on our history
 

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Harvard Business Review .. GM’s Stock Buyback Is Bad for America and the Company

GM did $20.4 billion worth of buybacks from 1986 through 2002. If it had saved that money and earned a modest 2.5% on it, the company would have had $35 billion on hand when the financial crisis and Great Recession hit and probably would not have had to file for bankruptcy protection. As Bob Lutz, the veteran auto executive, said recently, stock buybacks are “always a harbinger of the next downturn…in almost all cases, you regret it later.”
Taxpayers and workers brought GM out of bankruptcy, yet it is the hedge funds that will reap the biggest rewards. Taxpayers and workers should demand that open-market repurchases by all companies be banned. Stock buybacks manipulate the stock market and leave most Americans worse off. In this case, it is clear that what is good for the hedge funds is bad for the United States.
 
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