Tales from Bailout Nation Pt. XXVIII

And the beat goes on...

General Motors Co.'s recent stock offering was staged to start paying back the government for its $50 billion bailout, but one group made out much better than the taxpayers or other investors: the company's union.

Thanks to a generous share of GM stock obtained in the company's 2009 bankruptcy settlement, the United Auto Workers is well on its way to recouping the billions of dollars GM owed it — putting it far ahead of taxpayers who have recouped only about 30 percent of their investment and further still ahead of investors in the old GM who have received nothing.

The boon for the union fits the pattern established when the White House pushed GM into bankruptcy and steered it through the courts in a way that consistently put the interests of the union ahead of many suppliers, dealers and investors — stakeholders that ordinarily would have fared as well or better under the bankruptcy laws.

The union's health care and pension trust fund earned $3.4 billion through the sale of one-third of its shares in GM last week. Analysts estimate that it would break even if it sells the remaining two-thirds of its shares at an average price of $36 — close to where the stock traded shortly after the offering hit the market. GM shares closed at $33.45 on Wednesday.

Analysts predict that stocks will have to rise anywhere from $52 to $103 a share for the U.S. taxpayer to break even. Currently, the U.S. taxpayer is $9 million in the hole.


At the bottom of the linked article, we get this:

John Paul McDuffie, a professor at the Wharton School of Business, said the full funding of the union's pension and health care trust fund through the bankruptcy process represents progress because it helped solve one of most "persistent and difficult" bones of contention between GM and its union.

GM and the UAW had been at loggerheads for years over how to deal with GM's so-called "legacy" costs — funding the generous worker health care and retirement benefits it promised in earlier eras.

The bankruptcy settlement enabled GM to proceed with a hard-won 2007 plan it negotiated with the union to spin off those huge liabilities and let them be funded in the future by the trust fund that received the stock.

If this plan was already "won" then why was it part of the sweetheart bankruptcy deal?

Translating McDuffie then: Thorny legacy cost issue? Wave magic wand and give union trust fund exceedingly favorable stock treatment regardless of what had been negotiated previously. Problem solved.


We suppose that what is also part of the outrage with respect to this tax-payer funded bailout is that even if you tried to justify this unholy arrangement, where is the evidence that the federal government will not simply swoop in again to salvage a poorly-run business that makes horrible business decisions and manufactures products that no one wants to purchase?

Oh, and did we mention no guarantees against a tax-payer funded bailout with the attendant arm-twisting and smearing of those voicing objections to the bankruptcy proceedings and the lying about how the bailout money was paid back?

Tell it to this guy.

Craig Coffey, a retiree in Nevada who invested $55,000 in bonds in the old GM that are now worthless, was outraged that the union is on its way to recovering all its money before investors get even a cent of compensation.

"We just sat and watched [the stock offering]. We got nothing," he said. "Screwed again."

And where an angry mob of potential customers set upon the dancers

... they didn't but perhaps they should have.

How is that we go from Bob Seeger's "Like a Rock" and John Mellencamp's "This is our country" to help sell Chevy/GM products to horror that is below? Via The Scratching Post:






And with respect to this electric = green thing, someone is going to have to sit down and explain this to us as nearly half of the electricity we generate comes from coal-fired plants.

But when all is said and done we'll never look at the inverted one-armed hand plant quite the same again.

You Lie! (Revisited)

Steve Rattner, the man tabbed to head up the Obama regime's automotive task force, ostensibly an oversight committee for government-owned and operated General Motors and Chrysler, has been making the rounds of late trying to convince everyone of how swell the government take-over of the two aforementioned companies is coming along.

With great interest we read the article to see if he would get around to addressing the lie peddled by GM CEO, Ed Whitacre, that claimed on nationally-televised commercials no less, that GM had paid off its TARP loan. We covered this in You Lie!, where the reality of the situation is that they used a separate TARP fund to pay off the original. Rattner does indeed address the issue in about the only fashion you can when you've been caught red-handed making completely bogus claims. Here are the two money paragraphs (with intermittent commentary):

Consequently, the U.S. Treasury is well on its way to recovering most of the $81 billion that the government invested in the auto sector to prevent its collapse. (That includes money for other auto-related entities, such as the finance companies. Chrysler itself got around $8 billion from the Obama administration and $4 billion from the Bush administration.) Not surprisingly, partisans on both sides have elasticized the facts: GM has been proclaiming in ads that it has paid back the government loans "in full." While literally correct, this statement omits the fact that most of the government's investment in GM is in stock that it still holds.

(italics, ours)

Classic deflection. Belittle the argument because you were getting it from both sides. And in "literally correct", we suppose he's owning up to being a straight up liar because we don't know what stake the government still has in GM has to do with using your Visa card to pay off you MasterCard.

More:

Meanwhile, conservatives such as Sen. Charles Grassley, the ranking Republican on the Finance Committee, maintain that GM has paid back the government with government money. That's true, but only technically. We provided GM with a cash reserve -- to protect taxpayers' investment in the case of a prolonged auto recession -- that has now proved unneeded. The fact remains that the nation's largest automaker has outperformed our expectations -- increasing the amount of money that the government is likely to recover.

(italics, ours)

Translation: The charge that we used separate TARP money to pay off the original TARP loan is true only if you believe that we set up, in case of a prolonged recession and in order to protect the taxpayer, a cash reserve consisting of... taxpayer money.

Unreal.

From our original post which was later updated:

We originally posted this over the weekend, when readership is down a bit but we wanted to resurrect it during the week to highlight the sheer audacity of General Motors. The federal government is entirely complicit in what we can only tag as gangster capitalism. The government takeover and bankruptcy proceedings that screwed over the secured creditors in favor of the labor unions was executed in a thuggish manner and now the GM/federal government partnership openly displays their contempt for the American public by running an ad during the NBA playoffs patting itself on the back for a job well done.

And Rattner only continues flipping the bird at the American public with these sort of articles.

We'll trust the eye candy, thank you.

In less than a year, General Motors Co. has roared back from bankruptcy to a quarterly profit. Now comes the hard part: Sustaining the income and repaying billions of dollars in government aid.

There are signs that GM is on track to do just that. Revenue is up 40 percent over the first quarter of last year. U.S. sales rose 17 percent for the quarter, and the automaker made an operating profit in North America, which had been a cash incinerator. Units in Asia and Latin America posted strong numbers, too.

As a result, the automaker announced Monday, its net income rose to $865 million, a dramatic reversal from the $6 billion the company lost in the same period last year.

"Today's news was wonderful, and even better than we ever expected to be this far in the post-restructuring period," said Steven Rattner, former head of the Obama administration's Auto Task Force.

And we should believe all this because..? GM had no problems last month trotting out their CEO and flat-out lying to the American public regarding the true nature of Government Motor's claim they had repaid, in full, their share of the TARP bailout loan (they simply used another line of TARP credit to do so).

We note that an earlier version of this story from yesterday morning failed to point this out so we give credit to this version for broaching it... sort of.

Some experts were skeptical. James Schrager, professor at the University of Chicago Graduate School of Business, said GM has a history of making boastful claims, only to disappoint. A recent television ad in which CEO Ed Whitacre declared that the company had repaid its government loans in full, with interest, was misleading, he said.

(italics, ours)

It was not misleading in any way. It was a flat-out lie.

To a larger point, though, when the government owns 61% of GM stock and was caught red-handed cooking the books, what exactly does turning a profit of $865 million mean? And probably more germane to this exercise, when that same government that owns GM can print money to its heart's content, of what real significance and meaning are balance sheet losses?


P.S. Stever Rattner, who wrote one of the most self-serving articles we've ever read, will be penning a book on how Team Obama rescued General Motors. To say his book will lack credibility is to understate things a tad.

...for the other shoe to drop

Crony capitalism is a pejorative term describing an allegedly capitalist economy in which success in business depends on close relationships between businesspeople and government officials. It may be exhibited by favoritism in the distribution of legal permits, government grants, special tax breaks, and so forth.

'Extortion',

outwresting, or exaction is a criminal offense which occurs when a person unlawfully obtains either money, property or services from a person, entity, or institution, through coercion. Refraining from doing harm is sometimes euphemistically called protection.

Well, that didn’t take long…

Rep Barney Frank (D-Mass.) won a stay of execution on Thursday for a General Motors plant in his district that the automaker had announced it would close.

No other lawmaker has managed to halt the GM ax. As chairman of the House Financial Services Committee Frank oversees the government's bailout program, known as TARP. Frank's staff said the lawmaker spokes with GM CEO Fritz Henderson on Wednesday and convinced him to keep the Norton, Mass. plant open for at least 14 months.

"I greatly appreciate General Motors' willingness to take into consideration the wider needs of the company and especially the community," Frank said in a statement. "Keeping the facility open for this extra time gives workers a chance to look at other opportunities, while at the same time continuing to provide for their families."