GM Profits & Taxpayers Continue to Lose


Well, it’s been three years and GM has announced some unrealistic profit targets for 2012. Should they meet these targets by clicking their slippers and getting an audience with the Wizard of Oz, taxpayers will not get their money back according to a senior analyst at Reason Foundation.

GM stock hovers around $25 (we paid $55 for it because our government invested for us.)

…If investors aren’t buying GM’s rosy scenarios, it’s for some good reasons, says Dalmia, the senior analyst.

  • Peter De Lorenzo, editor of Auto Extremist, notes that GM is facing the most competitive market in history and investors are dubious that it can deliver.
  • GM’s $8 billion in profits last year resulted partly from the tsunami in Japan that disrupted Toyota and Honda’s global supply chain.
  • Both are back this year and more formidable than ever.

Tougher competition in North America is not GM’s only worry.  Its sales in China are slowing.  Also, Europe will probably remain a trouble spot.

  • GM suffered $2 billion in losses in Europe last year, thanks to Opel.
  • But GM has been unable to obtain permission from the German government to restructure its labor costs, even as European sales plummet in an economic meltdown.
  • What’s more, GM’s global pension obligations are underfunded to the tune of $22 billion — about $10 billion in the United States alone.

If GM manages to address all these issues, notes Sean McAlinden of the Center for Automotive Research, its share price might go up $40 to $45, leaving taxpayers still $5 billion to $8 billion in the red.  But that’s under the best scenario.  If stock prices remain at the current $25 level, the losses could mount up to $15 billion. That’s not counting the $15 billion in tax write-offs that GM got as part of the bankruptcy deal.  All in all, taxpayers are facing somewhere from $20 billion to $30 billion in losses…Read here: Bloomberg