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1 GM whats in it for taxpayers on Tue Jun 02, 2009 2:27 pm

gypsy


Moderator
http://news.yahoo.com/s/bw/20090602/bs_bw/jun2009db2009061280860


By Theo Francis Theo Francis – Tue Jun 2, 8:08 am ET
When it comes to General Motors, President Barack Obama has stressed that federal officials are "acting as reluctant shareholders," as he put it June 1. But his decision to plow $30 billion more into the company for a majority ownership stake makes it clear that the government is investing in earnest.

So what would it take for that investment to pay off? Judging from the figures so far: ample patience. At the most basic level, GM's market value will have to surpass that of McDonald's (NYSE:MCD - News) -- rising to nearly $69 billion just for taxpayers to break even. On May 29, as investors resigned themselves to GM's bankruptcy, the company's market capitalization was less than $500 million. In a background briefing the day before GM's filing, a senior Obama Administration official said it's unclear how taxpayers will fare. "I don't know how much we're going to recover. We hope to recover as much as we can," he said.

Before this week, the government had shelled out about $20 billion in loans for General Motors, and on June 1 officials said U.S. taxpayers would plunk down an additional $30 billion. Most of those loans, about $41.2 billion worth, will be converted into equity, giving Uncle Sam 60% of the new GM if it emerges from bankruptcy in 60 to 90 days, as planned. The remaining $8.8 billion would persist as loans under the reorganization plan.

"A Highly Speculative Investment"

So if 60% of the company cost taxpayers $41.2 billion, the revitalized company's stock-market value must reach $68.7 billion for the investment to break even. Broadly similar results are yielded by Canadian contributions to the reorganization -- $9.5 billion for a 12% stake and $1.7 billion in debt and preferred stock -- and the holding that a union benefit plan would get in return for some of its claim on the automaker: a breakeven point between $62 billion and $69 billion.

With the company's market value hovering recently around $500 million, there's a steep financial slope to climb at the very least. And some are more skeptical. "The likelihood of it getting to the equity being worth anything seems very slim to me," says Kurt Brouwer, a financial adviser in Tiburon, Calif., who grew up in Grand Rapids, Mich., and has relatives who still work at U.S. automakers. "If you want to call it an investment, you'd have to call it a highly speculative investment."

Far more is at stake for the government and taxpayers than a financial play. Policymakers are worried that the uncoordinated bankruptcy of a company GM's size would throw tens of thousands out of work when the economy can little withstand such a shock.

Chrysler's Profitable 1979 Bailout

Nor do long odds mean taxpayers are necessarily out of luck. As officials from both parties were fond of reminding the public last fall, bailouts sometimes turn a profit for the government. As lawmakers struggled with how to address the foreclosure crisis last fall, for example, many cited the Home Owners' Loan Corp. -- the Great Depression's HOLC -- which bought and refinanced home loans and is widely described as having turned something of a profit over its nearly two decades in existence.

More to the point, when the federal government bailed out Chrysler in 1979 with $1.2 billion in loan guarantees, or $3.5 billion in today's dollars, the automaker repaid the loans by 1982 -- ahead of schedule. Taxpayers collected $311 million by auctioning off the Chrysler stock warrants received as part of the arrangement.

In the case of GM and Chrysler, plans to foster low-emission, high-efficiency vehicles could pave the way for the auto industry to recover and become profitable. But it's sure to take time.

"It's got to be looked at as a long-term investment," says James Holzman, a certified financial planner and CPA with Legend Financial Advisers in Pittsburgh. "But you've got to look at it speculatively before that, probably for at least five years."

It will certainly take a while. Sources close to the United Auto Workers and the Treasury Dept. say neither wants to hold the stock for long. But it will take 6 to 18 months before the company is again publicly traded -- and longer still for GM to appreciate in value. Says GM President and CEO Frederick "Fritz" Henderson: "This is a question of years, not months."

2 Re: GM whats in it for taxpayers on Tue Jun 02, 2009 3:29 pm

SSC


Admin
Exactually what I was saying..more and more money and chances are slim of a recovery...Let them die

3 Re: GM whats in it for taxpayers on Tue Jun 02, 2009 5:33 pm

gypsy


Moderator
they recovered before and paid it back ,I sure am glad your not our leader LOL

4 Re: GM whats in it for taxpayers on Tue Jun 02, 2009 8:36 pm

SSC


Admin
You must be refering to Chrysler
This article is about GM..and to date 50 BILLION in govt. bail out funds, with a very poor future to survive even with a scale back.

5 Re: GM whats in it for taxpayers on Tue Jun 02, 2009 8:40 pm

gypsy


Moderator
SSC wrote:You must be refering to Chrysler
This article is about GM..and to date 50 BILLION in govt. bail out funds, with a very poor future to survive even with a scale back.

In the case of GM and Chrysler, plans to foster low-emission, high-efficiency vehicles could pave the way for the auto industry to recover and become profitable. But it's sure to take time.

was using them as an example, one cannot determine what will happen, until it does

6 Re: GM whats in it for taxpayers on Tue Jun 02, 2009 9:28 pm

SSC


Admin
That is obvious , all you have to do is read the article , but you were confusing the two car makers on the recovery from the 80's.. Reread your post and maybe you will see we are dealing with two different auto makers and different forms of bailouts..

7 Re: GM whats in it for taxpayers on Tue Jun 02, 2009 9:40 pm

gypsy


Moderator
No !see your reading more than there is, if one dealership can do it why can't another, it was a reference.your very good at twisting words and putting it to your way of thinking` Wrong again~it was 1997 i believe the correct year~

8 Re: GM whats in it for taxpayers on Tue Jun 02, 2009 9:59 pm

SSC


Admin
Chrysler's Profitable 1979 Bailout

Nor do long odds mean taxpayers are necessarily out of luck. As officials from both parties were fond of reminding the public last fall, bailouts sometimes turn a profit for the government. As lawmakers struggled with how to address the foreclosure crisis last fall, for example, many cited the Home Owners' Loan Corp. -- the Great Depression's HOLC -- which bought and refinanced home loans and is widely described as having turned something of a profit over its nearly two decades in existence.

More to the point, when the federal government bailed out Chrysler in 1979 with $1.2 billion in loan guarantees, or $3.5 billion in today's dollars, the automaker repaid the loans by 1982 -- ahead of schedule. Taxpayers collected $311 million by auctioning off the Chrysler stock warrants received as part of the arrangement.

In the case of GM and Chrysler, plans to foster low-emission, high-efficiency vehicles could pave the way for the auto industry to recover and become profitable. But it's sure to take time.

"It's got to be looked at as a long-term investment," says James Holzman, a certified financial planner and CPA with Legend Financial Advisers in Pittsburgh. "But you've got to look at it speculatively before that, probably for at least five years."

It will certainly take a while. Sources close to the United Auto Workers and the Treasury Dept. say neither wants to hold the stock for long. But it will take 6 to 18 months before the company is again publicly traded -- and longer still for GM to appreciate in value. Says GM President and CEO Frederick "Fritz" Henderson: "This is a question of years, not months."
-----------------------------------------------------------------------------------------------------------------this is what I was trying to get you to read, but once again you are getting confused and blaming me for twisting words when it is you who is confused..

9 Re: GM whats in it for taxpayers on Tue Jun 02, 2009 10:16 pm

gypsy


Moderator
nope i read it, and copied an excerpt from it~we can't predict something until it happens,I am not going to say they will fail, like you do` and it has nothing to do with common sence oops sense I will hope for the best, I have never read any positive words you have written here none~ that speaks volumes` how long are we going to go tonight? we both do not keep our word about ending this` i can do it~ can you?
this from your article also
a good point

Nor do long odds mean taxpayers are necessarily out of luck

10 Re: GM whats in it for taxpayers on Tue Jun 02, 2009 10:51 pm

rosco 357


Veteran
oh gee Chrysler was bailed out by jimmy carter, chrysler had lee Iaccoca.. then, and i think the country actually made money off the outcome, this is all memory,

11 Re: GM whats in it for taxpayers on Tue Jun 02, 2009 10:52 pm

rosco 357


Veteran

12 Re: GM whats in it for taxpayers on Tue Jun 02, 2009 10:54 pm

SSC


Admin
Hellooooooooooooo, that was copied from YOUR original article, you know the one you read ...lol
I can either keep this up all night or go play off my 100 games on IYT, depends on how boring you get....

13 Re: GM whats in it for taxpayers on Tue Jun 02, 2009 11:01 pm

gypsy


Moderator
SSC wrote:Exactually what I was saying..more and more money and chances are slim of a recovery...Let them die
Exactually??

14 Re: GM whats in it for taxpayers on Tue Jun 02, 2009 11:05 pm

gypsy


Moderator
SSC wrote:Hellooooooooooooo, that was copied from YOUR original article, you know the one you read ...lol
I can either keep this up all night or go play off my 100 games on IYT, depends on how boring you get....

ok Do you like dole Bananas best?? I do !! yes i have 70 games waiting for me,hey no one is twisitng your arm to stay,i must be doing well conversing with the know it all?? that last part is a question ,just in case!! do you play chess? what is your favorite game? what was copied!! lol

ok on the orginal

15 Re: GM whats in it for taxpayers on Tue Jun 02, 2009 11:16 pm

SSC


Admin
No clue on Chess, I play all the anti-games, jamble and single boatzee, pente, halma ,4x4, hex and anything someone is willing to teach me , I play 3 sites but not every day to time consuming. As far as bananas I prefer Chiquita brand.

16 Re: GM whats in it for taxpayers on Tue Jun 02, 2009 11:26 pm

gypsy


Moderator
ahh maybe you could send a game some time!1 LOL I don't do any games Anti`

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