Why doesn’t GM bailout Detroit?
posted at 8:01 am on July 26, 2013 by Bruce McQuain
According to GM CEO Dan Akerson, “generous” American taxpayers who bailed out GM wouldn’t care if they lost a couple billion dollars.
”We are in the midst of transforming an iconic American company so 20 and 30 years from now (taxpayers) will look at this company and they’ll say, ‘Absolutely it was the right thing to do,’ ” Akerson said. ”And it shouldn’t be measured on did it sell for $43 or $53 (a share) or did they lose a couple billion dollars?”
But really it’s only the U.S. Treasury that’s losing money right now, not GM. According to the AP, the stock would need to triple in value for Treasury to break even:
General Motors stock would have to sell for $95.51 per share for the U.S. government to break even on bailing out the company, according to a government watchdog’s report released Wednesday…. Since emerging from bankruptcy, the restructured company has piled up $17.2 billion in profits…. The government is still $18.1 billion in the hole on the $49.5 billion bailout, including interest and dividends, according to the report.
One of Dan Akerson’s favorite topics in public comments is GM’s “fortress balance sheet.”
They see a company with a fortress balance sheet that allows it to weather economic storms while keeping capital investment strong.
Some of the lessons were financial, including how important it is to have a fortress balance sheet and a low break-even point. We have them today and we will protect them fiercely because they make it possible for us to reinvest about $8 billion in the business every year regardless of the economic cycle.
Creating a fortress balance sheet, giving us freedom to operate . . . $36.5B of available liquidity with only $5B of debt on March 31.
Google can help you find plenty more references, but clearly GM is sitting on piles of cash while taxpayers suffer.
Now that Detroit is $20 billion in the red, Government Motors is nowhere to be found. But Akerson also once said GM and the UAW have a “sacred obligation” to repay the favor that the American taxpayers did for them in the bankruptcy and bailout:
“We have a sacred obligation, all of us, to deliver on the promise and the helping hand that the American public extended to this company in its hour of need,” said GM CEO Dan Akerson, in a ceremony at GM’s Detroit-Hamtramk plant.
GM and Akerson could take the $16 billion tax gift that Obama gave them, and help save Detroit.
Congress limited tax-loss carry forwards because it concluded they were being abused to unfairly erase tax liability. If the Administration thinks that’s bad tax policy, it ought to propose changing the rule for all companies, not merely for those it owns. Instead, it has handed a $16 billion tax gift to GM that isn’t available to Ford or other auto makers that didn’t take bailout cash. It’s one more example of the way the political class has stacked the deck in favor of Government Motors.
Especially since the City of Detroit’s latest revenue report cites the tax gift GM received as a major factor in its own inability to collect revenues:
The management from the Income Tax Division predicted that the corporate income tax revenue will not be significantly increased in 2012-2013 due to net profit loss carry forward from previous years for some big companies like General Motors.
But no, Dan Akerson runs around the country bragging about GM’s “fortress balance sheet,” while … wait for it …. also bragging about how much money they’re investing in jobs in China:
GM recently announced at the Shanghai Auto Show that it would spend roughly $11 billion on facilities in China by 2016 – creating almost 6,000 new jobs. To further twist the knife, according to AutoNews.com, the number of GM workers employed in North America has fallen by 76,000 since 2005…. Americans “could very well” soon find Chinese-made GM cars on showroom floors, and that “[there] is no reason why we can’t be exporting to the [United] States.”
In other words, GM isn’t “paying its fair share” and has done just about everything Obama said it would if Romney had won the election. The City of Detroit has been left holding the bag. So why isn’t Obama upset about any of it? (Hint: he already appeased the UAW, and doesn’t have to face another election.) And anyway, why should GM help Detroit?
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