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.”

June 13, 2013:

They see a company with a fortress balance sheet that allows it to weather economic storms while keeping capital investment strong.

December 19, 2012:

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.

June 7, 2011:

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?

~McQ

Blogging daily and Questions and Observations


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The voters did it to their own city, the pension/contract holders did it to GM….#poundsand.

hillsoftx on July 26, 2013 at 8:06 AM

Obama’s America.

rob verdi on July 26, 2013 at 8:06 AM

The answer is painfully simple – it’s Other People’s Money that is to be used for all bailouts in the ObamiNation.

BTW, glad to see you’re filling in for Ed.

Steve Eggleston on July 26, 2013 at 8:09 AM

According to GM CEO Dan Akerson, “generous” American taxpayers who bailed out GM wouldn’t care if they lost a couple billion dollars.

…should read BS CEO!
BullSh!t!

KOOLAID2 on July 26, 2013 at 8:10 AM

+1 hillsoftx

Reap what you sow dems/ unions

cmsinaz on July 26, 2013 at 8:11 AM

Do you know what is the best (and only) thing about GM building and creating jobs in China?

All of those union workers, who called us liars last year when we showed that GM was going to do exactly what it is doing now, are going to lose their jobs.

I have no sympathy for idiots and those that believe in politicians like Barack Obama, who lie to their faces.

As for helping out Detroit, I no longer own GM stock (and will never buy another share because of its bailout) but if I did, I’d sell it ASAP if it put one penny into that corrupt bastion of social justice.

Detroit is a monument to progressive ideology and liberation theology. As the Washington Monument reminds us of independence, Detroit should serve as a permanent monument to dependence.

Let. It. Crumble.

Resist We Much on July 26, 2013 at 8:11 AM

A lack of money wasn’t Detroit’s problem, the natural corruption that takes place in progressive cities coupled with the insane race baiting, starting with Coleman Young are the bigger problems. Bail them out and the city will just do the same things over. Too many Detroiter’s love misery.

Flange on July 26, 2013 at 8:12 AM

GM puts money in Chinese jobs because they are NOT Union! Current management is not as stupid as Odumbo!

What gets me is that although Michigan is now a Right to Work state their existing contracts tie them to the UAW which owns gobs of their stock thanks to Odumbo.

Old Dog on July 26, 2013 at 8:12 AM

OT: man…someone vandalized the Lincoln memorial

Not good at all

cmsinaz on July 26, 2013 at 8:15 AM

Why doesn’t GM bailout Detroit?

Hard to bailout someone when your boat is underwater as well….

Gatsu on July 26, 2013 at 8:16 AM

OT: man…someone vandalized the Lincoln memorial

Not good at all

cmsinaz on July 26, 2013 at 8:15 AM

What sick twisted mind does that?

gophergirl on July 26, 2013 at 8:17 AM

OT: man…someone vandalized the Lincoln memorial

Not good at all

cmsinaz on July 26, 2013 at 8:15 AM

What sick twisted mind does that?

gophergirl on July 26, 2013 at 8:17 AM

May or may not be relevant: The colour of the paint was ‘GREEN.’

Resist We Much on July 26, 2013 at 8:20 AM

Get real. This kind of sophisticated information isn’t for the LIV who need their government cheese and couldn’t tell a balance sheet from a bed sheet.

ExpressoBold on July 26, 2013 at 8:20 AM

What sick twisted mind does that?

gophergirl on July 26, 2013 at 8:17 AM

A liberal would think it’s perfectly acceptable to try and manufacture racial tension. It’s like when they trash their own campaign HQs and blame the right.

Flange on July 26, 2013 at 8:22 AM

What sick twisted mind does that?

gophergirl on July 26, 2013 at 8:17 AM

…JugEars:…”It’s a beautiful color!”

KOOLAID2 on July 26, 2013 at 8:25 AM

Put Chinese made GM cars on American showrooms and they will never leave. I’m never buying GM again, having vehicles made in China will cement that decision.

Bishop on July 26, 2013 at 8:26 AM

Don’t know GG….maybe its morning joe he’s still ranting on about Zimmerman….

cmsinaz on July 26, 2013 at 8:26 AM

Why doesn’t GM bailout Detroit?

Because Obama’s going to do it… right after the 2014 elections.

petefrt on July 26, 2013 at 8:28 AM

A liberal would think it’s perfectly acceptable to try and manufacture racial tension. It’s like when they trash their own campaign HQs and blame the right.

Flange on July 26, 2013 at 8:22 AM

Or bring racist signs to a Zimmerman rally, like that one Leftist nutjob did the other day. It’s what they do…they can’t help it.

visions on July 26, 2013 at 8:28 AM

Ding ding ding petefrt

cmsinaz on July 26, 2013 at 8:31 AM

Disincorporate Detroit.

James on July 26, 2013 at 8:31 AM

Having GM bail out Detroit with its cash would kind of like trying to put out a bonfire by dumping dollar bills on it. Even if you have enough to smother the fire, it is more likely that the money will just feed the flames instead.

No Truce With Kings on July 26, 2013 at 8:34 AM

Because Obama’s going to do it… right after the 2014 elections.

petefrt on July 26, 2013 at 8:28 AM

He better tell the Fed that he needs it to digitise several trillion dollars because bailing out Detroit will open the floodgates. Every broke city from Stockton and San Bernardino to little Prichard, Alabama, will be lining up in DC with hat in hand.

Of course, he can’t do that without Congress so Dems had better win the House.

Resist We Much on July 26, 2013 at 8:37 AM

Detroit is a monument to progressive ideology and liberation theology. As the Washington Monument reminds us of independence, Detroit should serve as a permanent monument to dependence.

Let. It. Crumble.

Resist We Much on July 26, 2013 at 8:11 AM

Megadittos.

But you know and I know Obama will bail out the unions there… after the 2014 elections.

petefrt on July 26, 2013 at 8:38 AM

Helllllllllo, let China have it and turn it into a Hong Kong type financial titan.

You could call it CHINATROIT.

It will make a great sister city to CHINA ANGELES, CHINA FRANSISCO, CHINAEATTLE, CHINAORTLAND and all the other chunks of America that get handed over to the ChiComs after they (and the U.S. defaults on our nations debt).

PappyD61 on July 26, 2013 at 8:39 AM

Like Chinaellowstone…..their soon to be National Park up in Idaho.

And their river Chinassissippi.

And their newest Islands Chinawaii and ChinaRico.

PappyD61 on July 26, 2013 at 8:41 AM

“Why are you here?”

“To get some money.”

“What kind of money?”

“GM money.”

“Where’s it coming from?”

“GM.”

“And where did GM get it?”

“From Obama. We love him. That’s why we voted for him. Obama! Obama!”

Electrongod on July 26, 2013 at 8:42 AM

Man this blog is going down hill when it is arguing that GM should bail out a city government and that because it grew up in Detroit it owes Detroit.

astonerii on July 26, 2013 at 8:47 AM

PappyD61 on July 26, 2013 at 8:41 AM

Do the various Chinatown’s become known simply as Town’s then?

Flange on July 26, 2013 at 8:52 AM

Resist We Much on July 26, 2013 at 8:37 AM

With Boehner and ilk as our leadership, and Obama’s lawless exercise of power with no one holding him accountable, I’m not sure the Dems need to win the House to get it done.

Related: Keep an eye on all kinds of federal assistance to states being expressly conditioned on meeting federal standards of population density and politically correct diversity. Robbing the suburbs to pay for the cities. Obama’s Plans for the Suburbs: And How to Stop Them, Stanley Kurtz , NRO

The period between the 2014 and 2016 elections is going to be a doozy.

petefrt on July 26, 2013 at 8:54 AM

Man this blog is going down hill when it is arguing that GM should bail out a city government and that because it grew up in Detroit it owes Detroit.

astonerii on July 26, 2013 at 8:47 AM

Don’t ruin it. Any reason, even a liberal one, to hate US automakers is welcome here.

FUTURE-AMA!

Can’t see it?

Detroit is just a few years ahead of the rest of the country.

However, the whole left thinks that once we have real progress, everyone will live in a fabulous, green federal project. Just like the Soviets failed to do.

IlikedAUH2O on July 26, 2013 at 8:54 AM

Man this blog is going down hill when it is arguing that GM should bail out a city government and that because it grew up in Detroit it owes Detroit.

astonerii on July 26, 2013 at 8:47 AM

I see you missed the </sarcasm> tag Bruce put at the end of the piece. I’ll repeat the last sentence for you:

And anyway, why should GM help Detroit?

Steve Eggleston on July 26, 2013 at 8:57 AM

Unions.

Screw ‘em.

And lit Detroit crash.

coldwarrior on July 26, 2013 at 8:58 AM

OT: man…someone vandalized the Lincoln memorial

Not good at all

cmsinaz on July 26, 2013 at 8:15 AM

…its ok!…they’re combing the internet to find the perpetrators!

KOOLAID2 on July 26, 2013 at 9:00 AM

Do the various Chinatown’s become known simply as Town’s then?

Flange on July 26, 2013 at 8:52 AM

Oh, no. When all towns are Chinatowns, old Chinatowns become wontowns.

So simple.

coldwarrior on July 26, 2013 at 9:01 AM

KOOLAID2 on July 26, 2013 at 9:00 AM
cmsinaz on July 26, 2013 at 8:15 AM

Lincoln was a Rethuglican or something?

coldwarrior on July 26, 2013 at 9:02 AM

Why doesn’t GM bailout Detroit?

You ought to have written bail out rather than bailout for this usage, Bruce.
Bailout is a noun.

itsnotaboutme on July 26, 2013 at 9:08 AM

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?

GM didn’t build their company. The American taxpayers did. Time to make them pony up even if the UAW pensions go into default as they should have five years ago. A bunch of lazy autoworkers who made a “career” out of only screwing bolts on the left side of crappy GM products (the UAW required a right side bolt screwer too).

Happy Nomad on July 26, 2013 at 9:08 AM

Well O’commo said he wanted to be president of China. Who knew he meant the United Chinese States of North Amerika! I wish someone would throw green paint on the face of our other so called Lincoln if you know what I mean.

RAIDER on July 26, 2013 at 9:13 AM

Related: Keep an eye on all kinds of federal assistance to states being expressly conditioned on meeting federal standards of population density and politically correct diversity. Robbing the suburbs to pay for the cities. Obama’s Plans for the Suburbs: And How to Stop Them, Stanley Kurtz , NRO

The period between the 2014 and 2016 elections is going to be a doozy.

petefrt on July 26, 2013 at 8:54 AM

Read about it. South Dakota v Dole comes to mind.

Resist We Much on July 26, 2013 at 9:14 AM

Forget bailing out Detroit, that transfers the burden to taxpayers again and prolong the inevitable. Try refunding the treasury.

AH_C on July 26, 2013 at 9:29 AM

Been a Chev guy all my life (now 57 yrs old).
Just bought my first Ford.
GM should have filed Bankruptcy and moved on with life.
They’ll never get this stink off of them.

Whiterock on July 26, 2013 at 9:38 AM

What sick twisted mind does that?

gophergirl on July 26, 2013 at 8:17 AM

Lincoln was the first Republican President after the base split from the Whigs to more quickly act on abolishing slavery. Do you really need to ask who would do this? Obviously, it’s the evil GOP! /sarc

dominigan on July 26, 2013 at 9:41 AM

Literally everything spewed by Government Motors is a lie.
The “bottom line” would be much more realistic IF they had NOT stolen the many franchises from Registered Republican owners AND if GM had paid the shareholders (investors) the going market rate.
This scam is a combination of Eliot ‘The Extortionist’ Spitzer in New Yawk and Barry the Evil Clown from ChiTown.
BTW … The CEO of Ford is a liar too when he claims that FORD never took a “bailout”. They dämn sure did via “Ford Credit”. GM had already spun off their lending authority, GMAC.
~(Ä)~

Karl Magnus on July 26, 2013 at 9:42 AM

It stinks GM is creating jobs over in China but let’s face it, GM giving money to Detroit would be throwing government money after good money after bad money.

Ukiah on July 26, 2013 at 10:17 AM

I think we already lost the chance for our future prosperity with the re-election of Obama, but still there is British style decline of the 1970′s and there is Zimbabwe style economic suicide. Let’s opt for British style decline and not bailout Detroit.

thuja on July 26, 2013 at 11:00 AM

Is there anyone in his right mind who believes that Detroit, after receiving a total bailout, would NOT be in the same position in fifteen years or sooner?

When the pols who run the city are a bunch of foaming redistributionists, Detroit’s fate is sealed.

BigAlSouth on July 26, 2013 at 11:11 AM

Because GM DID NOT get a “bailout” – the AFL-CIO and Teamsters did

So – CORRECT your caption to:

WHY Doesn’t The AFL-CIO and Teamsters Bailout Detroit

williamg on July 26, 2013 at 12:22 PM

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.”

Meanwhile, “Japanese” automakers like Honda, Toyota, and Nissan have plenty of car-making factories in the United States, employing American workers to make cars sold to Americans. Caveat: most of these car plants are in the southern United States, in right-to-work states, and don’t owe anything to Detroit or to the UAW.

But Obama wanted to bail out the UAW, who short-circuited General Motor’s preferred creditors, so the UAW could buy Michigan for Obama. He couldn’t afford to lose Michigan to a candidate whose father used to own a car company and was a former Governor there!

Steve Z on July 26, 2013 at 2:43 PM