You probably thought the embarrassing GM bailout couldn’t get worse, but it just got worse. Remember when Obama took the bankruptcy out of the hands of the courts, fired the CEO, put the unions before the creditors and dissolved dealerships with no rhyme-nor-reason?
Remember when we paid $55 a share for the stock now worth $24?
Don’t forget the less-than-honest CEO who ran a commercial claiming that GM paid back the loans.
The shell game they played would have made Bernie Madoff proud.
Fifty billion of TARP money was set aside for the bailout. The government spread it out in this way: 29.1 billion GM stock (essentially cutting out the creditors & investors who should have been first); 6.7 billion in loans to GM; and 13.4 bilion went into escrow.
When GM allegedly “paid it back,” they took the money from escrow, much less than owed and converted it into a loan payment and gave it back to TARP.
Why is this story so important? For one thing, it fundamentally changed our capitalist system by changing the way we do business. Why would anyone want to invest or give credit to businesses if the government can take the investment whenever they choose. Secondly, GM lied and said they paid us the money back, but it was with our own money and it left a large sum unpaid. Third, the government paid off the unions with money that rightfully belonged to creditors and investors.
It was really a UAW bailout – “
Under the administration’s plan, the U.S. government got 60 percent of the new GM (Government Motors), the Canadian government received 12.5 percent, the United Automobile Workers’ health care fund got 17.5 percent, and bondholders got the leftover 10 percent.
As a sweetener, the UAW also received a $2.5 billion note, and $6.5 billion in preferred stock paying a 9 percent cash dividend.
In commenting on the plan, UAW leaders said that necessary changes involve “painful, unprecedented sacrifices” for union workers, according to the New York Times…LJ World
Now we have Ally, formerly GMAC – the lending arm of GM, going bankrupt and selling international operations. Our tax money bailed them out to the tune of $17 billion and they still owe $12 billion. The U.S. owns 74% of the company.
We own it, so where are our dividends?
This bankruptcy will allow them to pay some of the money they owe us.
GM and GMAC should have been allowed to go through a normal bankruptcy which would have dealt with the unsustainable legacy costs. This time it’s the lending company but what about the auto company? Their sales are down. Japanese car companies are back in the mix and GM’s overseas truck sales are down. It seems like it will be a long time before the stock could be sold close to what we paid for it.
Check out the GMAC information on Reuters