The Auto Bailout Failure Is Now Complete

The bailout exemplifies much of what's wrong with government.

You may recall that during the presidential election, the Treasury Department refused requests by General Motors to unload the government's stake in the giant automaker. 

Taxpayers had sunk $50 billion into a union bailout in 2009 and were now proud owners of 26.5 percent of the struggling company. Reportedly, GM had growing concerns that the stigma of "Government Motors" was hurting sales in the United States. At the time, any transaction would have come at a steep loss to taxpayers and undermined the president's questionable campaign assertions that the auto union rescue had been a huge success. 

Well, now that the election is over and the Treasury Department is freed of political considerations, it plans to sell its 500 million shares of stock over the next 12 to 15 months and ease its way out of the company. GM will buy around 200 million shares at $27.50 per share by the end of the year. GM's buy brings taxpayers back to around $5.5 billion of the $27 billion the company still owes. The special inspector general for TARP estimated in October that the Treasury would need to sell the remaining 500 million shares at $53.98 per share just to break even on its investment.

Once GM buys its 200 million shares, the taxpayer stake in the company will drop to 19 percent, but the price to break even on the remaining 300 million shares will be around $70 per—or, in other words, probably never. As of this writing, GM shares are trading at around $27 per share.  That, in the Obama era, is considered a successful transaction between the state and private industry. So successful that you'll also remember that during the campaign, Obama maintained that "what we did with the auto industry, we can do in manufacturing across America." 

Taxpayer funds and unions for everyone.

Even if taxpayers recouped all of their money from the bailout, there are a slew of economic arguments against rescuing failing industries. But the more immediate problem is that we will never get our money back, anyway. 

GM's labor costs, estimated at $56 an hour, still are higher than any of its competitors. Since the Obama administration cajoled the normal bankruptcy hearings and eradicated the pensions of nonunion workers to ensure union success, employees, like the ones at Delphi, the auto parts manufacturer and one-time GM subsidiary, took it on the chin while $26 billion of taxpayer funds were used to keep United Auto Workers in a secure position. 

The Treasury Department has just revised its estimate upward to $25 billion in losses, and it will probably be more than that when it's all said and done. Taxpayers also suffered a $2.9 billion loss in Chrysler (the carmaker had received $12.5 billion through TARP programs) in 2011. 

"This announcement is an important step in bringing closure to the successful auto industry rescue, it further removes the perception of government ownership of GM among customers, and it demonstrates confidence in GM's progress and our future," claimed GM Chairman and Chief Executive Dan Akerson in a press release. But really, the bailout exemplifies much of what's wrong with government. The cronyism. Wasted taxpayer money. The government's propensity to interfere with the marketplace and prop up losing propositions.

With news of the government getting out of the car business, we'll probably see a spike in the stock price. Maybe once Obama has completely dropped our "investment" it'll take off. But a success for taxpayers? Hardly.

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  • Doctor Whom||

    In addition, the government is shielding those companies from the market's judgment on the quality of their vehicles. Why should they build better cars when the government effectively pays them not to do so?

  • Australian||

    You didn't build that.™

  • ||

    GM is alive and Osama bin Laden is dead! What more do you want?! Do you WANT American jobs to be lost? You're a no-good anti-American communist!

  • ||

    Shut up JJ, don't you have anything constructive to say? Like something about unions, or your mom?

  • ||

    She was paid prevailing wages for her stank.

  • ||

    You misspelled skank.

  • SugarFree||

    Maybe you both should just your whore mouths.

  • ||

    NutraSweet, you are incoherence personified.

  • ||

    You misspelled skank.

    No, I said what I meant and I meant what I said. Er, typed. Whatever. Blow me.

  • Pound. Head. On. Desk.||

    Whatever. Blow me.

    Yeesh! You kiss your mother with that tongue?

  • ||

    Obama is an unabashed fascist. When he first appeared on the scene it was clear that he was a radical socialist, but he has 'evolved'.

    It makes me sick that he was re-elected. I have some contempt for those that supported him the first time. I have nothing but contempt for those who supported him the second time around.

  • Contrarian P||

    Perhaps if his opponent wasn't pretty much a white Mormon clone, the election would have gone another way. You can't blame people for going with the devil they know when his opponent had no substantive proposals of his own and indeed pretty much promised to continue the devil's current policies.

  • The_Choctaw||

    He's either a fascist or a communist. Fucking pick one.

  • ThatSkepticGuy||

    Failed Reading Comprehension, just another valuable feature provided by Choctaw.

  • Anomalous||

    Fascism, mah nism.

  • some guy||

    Regarding the picture:

    I'll bet that model is as vapid and hollow as she is sexy. The girl in front is a looker too.

  • Pound. Head. On. Desk.||

    I was just coming here to post:

    Alt Text: I'd like to bail her out!

  • ||

    But wait. President Obama claimed he saved GM and we got all our money back. That's why I voted for him. Now I find it's not true? I want my vote back!

  • mr simple||

    but the price to break even on the remaining 300 million shares will be around $70 per—or, in other words, probably never. As of this writing, GM shares are trading at around $27 per share.

    Why do you think they keep pumping money out? Between devaluing our money and inflating the asset bubble, we'll get to that $70 eventually.

  • juliusaugustus||

    General Motors should have failed. They are crap company with crap business practices. They used government as a way of putting streetcar systems out of business. The streetcars were regulated out of existence thanks to general motors. Streetcar systems were also forced out of towns thanks to general motors. General motors lobbied for the national utility holding company act which forced utilities to sell streetcars. The national utility holding company act enabled GM with their vast wealth to destroy streetcars. A former CEO general motors Charles Erwin Wilson who even said "because for years I thought what was good for the country was good for General Motors and vice versa". Screw the american auto industry and screw general motors. Charles Wilson claimed the system was for the "national defense". But the reality was the system was giant handout to oil, tire, rubber, cement, real estate developers, and auto companies.

  • Red Rocks Rockin||

    They used government as a way of putting streetcar systems out of business.

    That may be, but the streetcars were going away regardless, because many of those companies were utterly corrupt and arrogant in their own practices. Look up a history of Denver Tramway, for instance.

    And now, streetcars are subsidized by the state in many areas where ridership can't keep up with costs, a la Amtrak.

  • juliusaugustus||

    If streetcar systems and passenger rail weren't so over regulated we would still have the systems to this day. As for bad business practices not all of them had bad business practices. Certain systems were run quite well. Many of them were also literally forced out of business.

  • Red Rocks Rockin||

    If streetcar systems and passenger rail weren't so over regulated we would still have the systems to this day

    Right--the development of affordable automobiles would have had no impact whatsoever.

  • juliusaugustus||

    Automobile usage is affordable because the government subsidizes them. Automobiles would have replaced some of the streetcar and passenger rail users. Like I said the system would still be here and we would have a system of private roads as well. I never said there would be no automobiles.

  • Red Rocks Rockin||

    Automobile usage is affordable because the government subsidizes them.

    This is magnificent circular reasoning on your part.

  • juliusaugustus||

    Automobile usage is subsidized on many levels to deny this is to deny reality. Like I said automobiles would still exist however older rail systems would exist. Auto dominance has been in the agenda of our local,state, and federal government's for years.

  • scareduck||

    Automobile fuel taxes pay not only the freight on roads, but subsidize rail transit as well. If the nirvana the new urbanists envision ever came about and Americans suddenly decided to stop driving, rail transport costs would be exposed for the insane ripoff they are. I used to work in the light rail "business", which is exclusively a function of those subsidies' presence.

  • juliusaugustus||

    Fuel taxes only provide 65% recovery rate with out diverting them to other things mind you. Roads are paid for through sales and property taxes. Fuel taxes are diverted towards transit but transit capital is also often diverted towards new highways. I am against ALL government transportation. Government Roads don't pay for themselves only private ones do. Rail is incredibly cheap and this why poor countries always have such systems. If America were to adopt rail they would save large amounts of money. You pro automobile libertarians are weird we like the free market but wand government intervention when it helps your ideas.

  • Doctor Whom||

    That's not what my progressive friends tell me. It was all the work of Emmanuel Goldstein the big, bad corporations, with no government involvement at all.

    As for the Interstate Highway System, progs are engaged in massive doublethink. They hate highways, but they use the IHS as an example of the good that comes from higher taxes. If I didn't know any better, I'd almost start to think that they viewed taxation as an end in itself.

  • juliusaugustus||

    Liberals are weird bunch the problem was caused by government thus the solution. They are against privatized transport but are in favor of rail. Rail will always be held so long a government maintains its semi monopoly on transportation. They love big government but hate cronyism even though those things go hand in hand.

  • sarcasmic||

    They love big government but hate cronyism even though those things go hand in hand.

    You don't understand. The reason the corporations (the rich) control the government (us) is because the government (we) doesn't have enough power. If the government (we) had more power then it could control the corporations (the rich) that currently control it. And if that doesn't work then give it (us) more power. With more and more power the government (we) will eventually control the corporations (the rich) that control it, and the people will finally get back what the corporations (the rich) stole from them.

    It's all about might makes right and class envy. Logic is not welcome.

  • R C Dean||

    They love big government but hate cronyism

    If they hate cronyism, why do they do so much of it?

  • sarcasmic||

    If they hate cronyism, why do they do so much of it?

    When they do it it's a "public private partnership" which is a good thing. It's only cronyism when someone else does it.

  • ΘJΘʃ de águila||

    Like the way they hated war.....until they discovered what a magnificent welfare program it was.

  • sarcasmic||

    I'd almost start to think that they viewed taxation as an end in itself.

    That's because they do. Taxation is how the little guy sticks it to the rich. The government is us and the rich are them. It is the duty of the government to rob the rich and give back to us. As long as they are still rich then we will know that they have not paid their fair share.

    So what if the logical conclusion is the destruction of wealth and shared poverty?
    Everyone will be equal and that is all that matters.

  • juliusaugustus||

    beat up the rich and take their stuff. They don't pay their fair share.

  • Moogle||

    Oh you people and your streetcars. Fuck streetcars. Give me my 2-seater roadster and that blonde bint in the article picture. Anyone know her hourly rate? Yeah, I'm a bad person, but I drive an awesome convertible and bang hot whores because I can. :-P

  • juliusaugustus||

    enjoy sky rocketing gas prices, traffic, pollution, driving school, angry drivers, police, parking fees, insurance payments, the possibility of death and all of the wonderful aspects of driving.

  • NealAppeal||

    enjoy sky rocketing tax burden, limited/unpredictable service, on our schedule - on our route, coin carrying, fare pass tracking, transfers, 4-6x the travel time, smelly/crazy people, pickpockets and muggers and all the wonderful aspects of mass transit.

  • Zeb||

    He's not arguing for subsidized, state run transport. I tend to think that street cars would mostly be out of business by now in any case, but who knows?

    Private cars and mass transport each have their merits. Some cities just wouldn't work at all if everyone tried to drive everywhere.

  • juliusaugustus||

    Exactly I think roads should be private and railroads should be private. The market is best at allocating resources. In my view in a free market rail would be more popular than it is now.

  • gaoxiaen||

    I enjoy travel in comfort at my convenience.

  • gaoxiaen||

    I enjoy travel in comfort at my convenience.

  • ||

    Fuck the taxpayer. They deserve everything they voted for. The ones who really got fucked in all of this is Ford (non-failing auto companies).

    They obviously executed a superior business model. Perhaps not a great one, but certainly better than their competition. So not only was the better company punished by not getting their "fair" share of the gubmint cheese, but they got fucked out of the market share they would certainly have gained had the free market been allowed to run its course.

    Can Ford sue the gubmint for lost profits?

  • ant1sthenes||

    "Fuck the taxpayer. They deserve everything they voted for."

    Who said taxpayers voted for the president?

  • UnionBuiltOhioRoads||

    This

  • Christina||

    And GM is expanding the scope of its alliance with the (also dying) Peugeot. I'm sure this will end well.

    http://blogs.wsj.com/drivers-s.....-alliance/

  • Doctor Whom||

    "We need an alliance with a company whose cars are even crappier and more pointless than ours."

  • Tman||

    Ever tried to work on a Puegeot?

    Even just changing the oil is like being 14 and trying to find the G-spot. Hopeless.

  • Bobarian||

    Who says this was a failure? Look at all those union votes bought and paid for.

  • R C Dean||

    Did Michigan and Ohio break for the President? I believe they did.

    Mission fucking accomplished, bitchez.

  • Rhywun||

    Obama maintained that "what we did with the auto industry, we can do in manufacturing across America."

    Just, wow. And they called Reagan "Teflon".

  • Sevo||

    "Obama maintained that "what we did with the auto industry, we can do in manufacturing across America.""

    That rat-hole's hard to fill.

  • XM||

    This article says TARP is breaking even -

    http://money.cnn.com/2012/12/1.....king-even/

  • JWatts||

    Look at the graph at the top of the article you referenced. The banks have paid back $23 billion more than they borrowed (interest was added). Meanwhile the auto bailout is $20 billion in the hole out of $80 billion given (I refuse to classify that as borrowing).

    So yes TARP is breaking even, but the auto bailout is not even close to a breakeven.

  • uythsb||

    Merry Christmas to you 2012.

  • ΘJΘʃ de águila||

    Obama has driven his Volt into a ditch and can't get out!

  • uythsb||

    Merry Christmas,NBA 2012

  • attractions guide||

    I think this is a good thing, and i always support Obama

  • Tablet pc||

    Complete? this is good, and i am looking forward it so long.

  • chenyan||

    Christian Louboutin high heels
    http://www.daffodileheels.com

  • OBD2 Scanner||

    Even if taxpayers recouped all of their money from the bailout, there are a slew of economic arguments against rescuing failing industries. But the more immediate problem is that we will never get our money back, anyway.

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