SirSaxa
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Post by SirSaxa on Nov 20, 2010 11:44:25 GMT -5
So Tbird, are you trying to tell us we should be calling Pres. Bush a Socialist too? BTW, do you know the difference between providing a short term loan in a stressful time, and, 8 months later, conducting an entire rescue, controlled bankruptcy and restructuring of a major, multi-national corporation? I like how you changed the subject there with the socialism comment, rather than focusing on the fact that there is difference between "providing a short term loan in a stressful time" and "ZERO". In fact, it seems that the loan of $9.4 billion to GM was a little bit more than "a short term loan in a stressful time", but a "a necessary step to help avoid a collapse in our auto industry that would have devastating consequences for our economy and our workers." That doesn't sound like "ZERO". Nor does the fact that GM would have RUN OUT OF CASH and stopped operating before January 2009. money.cnn.com/2008/12/19/news/companies/auto_crisis/index.htm?postversion=2008121909So you ARE calling Prez Bush a SOCIALIST! And no, I never changed the subject. Nor did I ever change my original position, which was: President Bush had absolutely ZERO to do with the rescue and restructure of GM And what is your point anyway? Are you trying to say that "Yes, the restructuring of GM is one of the most amazing accomplishments of the American Free Market system working in conjunction with the Government that MAKES that System possible, and President Obama deserves enormous credit for achieving it. And, oh yeah, don't forget to give Pres Bush some credit too? Is that it? You are acknowledging that is was a gigantic success so you want to glom on and claim a little credit for your guy? (even though we all know he had nothing to do with temporarily taking over a major US Corporation in order to save it, restore it back to health, and sell it back to the investment community?)
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SirSaxa
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Post by SirSaxa on Nov 20, 2010 17:37:33 GMT -5
The IPO was a referendum on the commercial prospects of the new GM, not on the wisdom of the policy of bailing out the old GM. You do realize that the new GM exists only because the Treasury burned $10 billion to make it happen, right? In other words, the company is still worth $10 billion less than what Treasury pumped into it. No value has been created. That's what the IPO signifies, which is why I wrote that it's no capitalist success story. If you were trying to compare the Federal Government's investment in GM with, say, a VC like Sequoia Partners investing in the latest high tech wizardry out of Silicon Valley, then no.... it would not be considered a success. But that was never the point of the Government rescue of the company. Nor was it some kind of exercise in "Social Policy", a term usually reserved for things like Civil Righs, Equal Rights, Universal suffrage, and so forth. For me, at least, the GM story is an issue of Economic Policy. You correctly point out the Government is still $10 biilion in the whole on the direct investment aspect of GM -- which, of course, is vastly better than its initial investment of $50 billion. And remember, opponents were totally against trying to save GM, preferring to let it collapse -- and the million + jobs, related industries, communities and all the rest that would go with it. But what have we achieved with our $10 billion? "No Value" as you believe? It seems to me, the Govt. has created a new entity with a market capitalization (that would be the total value of the company) of over $50 billion, and revenues -- i.e. economic activity -- of more than $130 Billion....annually. How much tax revenue is derived from $130 Billion in economic activity? And what would be the costs of allowing the company to fail? Unemployment insurance payments, failures of innumerable other companies - from industry vendors to mom & pop operations serving communities in places like Michigan, Ohio, Indiana and Bowling Green, KY - where Corvettes are made? How many additional tax revenues would be lost to all those cities and States? What would happen to property values? What would be the total loss of wealth for American citizens? Looked at another way, how do we put a value on the creation of $130 billion in economic activity.... ANNUALLY? I guess you might take the discounted present value of future activity -- but for how many years? Let's be ULTRA conservative and just say 10. Now what should be the discount rate we use given the extraordinarily low interest and inflation rates today? And how much growth would be realistic to plan for given both volume and pricing growth? Let's be ULTRA conservative again and say the growth will outpace the discount rate. So over 10 years, we will see (very conservatively) $1.3 TRILLION dollars in economic activity.... and the company will keep going at that point. How much tax revenue do you suppose will be generated by $1.3 Trillion? Now should we look at the multiplier effect of economic activity? So how many Trillions more? At the cost of... how much did you say? $10 billion? vs the reverse-opportunity costs of allowing the company to fail - which have not yet been calculated but clearly would be astronomical. Now getting back to the IPO valuation, GM and the Federal Government just conducted the LARGEST IPO in the history of American Business.... a VERY solid vote of confidence in the LONG TERM viability and attractiveness of an investment in GM. This is a fantastic AMERICAN success story -- Government and Industry working together. An economic success story and a financial success story. I can't think of any reason why Patriotic Americans would not want to celebrate our success.
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HoyaNyr320
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Post by HoyaNyr320 on Nov 20, 2010 19:25:46 GMT -5
The IPO was a referendum on the commercial prospects of the new GM, not on the wisdom of the policy of bailing out the old GM. You do realize that the new GM exists only because the Treasury burned $10 billion to make it happen, right? In other words, the company is still worth $10 billion less than what Treasury pumped into it. No value has been created. That's what the IPO signifies, which is why I wrote that it's no capitalist success story. If you were trying to compare the Federal Government's investment in GM with, say, a VC like Sequoia Partners investing in the latest high tech wizardry out of Silicon Valley, then no.... it would not be considered a success. But that was never the point of the Government rescue of the company. Nor was it some kind of exercise in "Social Policy", a term usually reserved for things like Civil Righs, Equal Rights, Universal suffrage, and so forth. For me, at least, the GM story is an issue of Economic Policy. You correctly point out the Government is still $10 biilion in the whole on the direct investment aspect of GM -- which, of course, is vastly better than its initial investment of $50 billion. And remember, opponents were totally against trying to save GM, preferring to let it collapse -- and the million + jobs, related industries, communities and all the rest that would go with it. But what have we achieved with our $10 billion? "No Value" as you believe? It seems to me, the Govt. has created a new entity with a market capitalization (that would be the total value of the company) of over $50 billion, and revenues -- i.e. economic activity -- of more than $130 Billion....annually. How much tax revenue is derived from $130 Billion in economic activity? And what would be the costs of allowing the company to fail? Unemployment insurance payments, failures of innumerable other companies - from industry vendors to mom & pop operations serving communities in places like Michigan, Ohio, Indiana and Bowling Green, KY - where Corvettes are made? How many additional tax revenues would be lost to all those cities and States? What would happen to property values? What would be the total loss of wealth for American citizens? Looked at another way, how do we put a value on the creation of $130 billion in economic activity.... ANNUALLY? I guess you might take the discounted present value of future activity -- but for how many years? Let's be ULTRA conservative and just say 10. Now what should be the discount rate we use given the extraordinarily low interest and inflation rates today? And how much growth would be realistic to plan for given both volume and pricing growth? Let's be ULTRA conservative again and say the growth will outpace the discount rate. So over 10 years, we will see (very conservatively) $1.3 TRILLION dollars in economic activity.... and the company will keep going at that point. How much tax revenue do you suppose will be generated by $1.3 Trillion? Now should we look at the multiplier effect of economic activity? So how many Trillions more? At the cost of... how much did you say? $10 billion? vs the reverse-opportunity costs of allowing the company to fail - which have not yet been calculated but clearly would be astronomical. Now getting back to the IPO valuation, GM and the Federal Government just conducted the LARGEST IPO in the history of American Business.... a VERY solid vote of confidence in the LONG TERM viability and attractiveness of an investment in GM. This is a fantastic AMERICAN success story -- Government and Industry working together. An economic success story and a financial success story. I can't think of any reason why Patriotic Americans would not want to celebrate our success. ^^^ This. The tea party types just don't get it. If an investment bank made the moves that the Government did with GM, they and the big fat cats on Wall Street would be applauding on Fox News and CNBC. When the Government plays the game in order to save an industry and jobs, its socialism. They just don't want to admit that the federal government was successful on the market- it hurts their narrative about the government being wasteful and evil.
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Post by jerseyhoya34 on Nov 20, 2010 23:27:31 GMT -5
Implicit in this discussion is the unanswered question of whether Wall Street would be cheering if the government had not intervened at all, as many Republicans and the Tea types have suggested. That is the only alternative to the Obama policies that has been offered, and nobody seems to have the stones to put any substance behind it.
Instead, what we've heard - in a time of crisis - is nothing more than a kill it until it succeeds politicking that is shameful to the core and has added no value to the country. They've complained about what they have when others have nothing.
I agree wholeheartedly with Saxa's analysis. More is to be considered than what Wall Street says about its pockets. There is extra income to the government arising from the tax that these folks now pay and all of the other direct/indirect outcomes that he mentioned.
I am proud to have supported the bailouts from the beginning and am grateful that many families in Michigan will be able to afford a proper Thanksgiving meal this week for the first time in a while. They don't deserve the attacks about whether Wall Street likes their jobs, whether their jobs are worth the expense, or whether a saved job "counts." By comparison, a single tax cut to the top 1% would be enough to purchase 36,400 pounds of organic turkey for needy families - enough to feed a good sized town in Michigan this Thanksgiving...and that is only from one taxpayer. I know what the response is...but...no...they did not earn that turkey...that is my turkey...this is America and that's socialism. I never thought the common good was socialist.
As the people (who call themselves populists) that have earned enough to pay income taxes now have their hands out to Uncle Sam and extol the virtues of tinkle down economics, it would pay to give thanks for the blessings of a job/employment that our fellow Americans in Michigan now enjoy anew. They are the folks who've suffered and whose bailout pails in comparison to what has been given to those who least needed it - and who have paid back $0 to Uncle Sam.
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SirSaxa
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Post by SirSaxa on Nov 21, 2010 8:54:10 GMT -5
Apparently, Economics 101 is not a required course for Vocabulary majors.
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SirSaxa
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Post by SirSaxa on May 3, 2011 12:24:21 GMT -5
As further proof of that saving GM and Chrysler was the right move for the country -- and not some wild socialist grab -- GM sales surprised to the upside once again. Saving the auto industry was all about JOBS. And it has worked beautifully. GM, Ford Sales Rise in April; Smaller Cars DominateExcerpts GM [GM 33.11 0.93 (+2.89%) ] sales for April in the U.S. were up 27 percent over the same time last year—much better than forecasts predicted.
The largest U.S. car company says it sold 232,538 vehicles last month, led by small cars and crossover vehicles.
"Consumers are continuing to rethink their vehicle choice," said Don Johnson, GM vice president for U.S. sales. GM says it expects to gain market share in April even though it cut spending on discounts.
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EasyEd
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Post by EasyEd on May 3, 2011 12:49:22 GMT -5
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ksf42001
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Post by ksf42001 on May 3, 2011 13:35:42 GMT -5
Good for Ford, but they benefited tremendously from the GM/Chrysler bailout. Without the bailout, Chrysler and GM would have failed. If they fail, their parts suppliers fail, since they can't be profitable only supplying Ford with parts. Ford would have had a very difficult time surviving in that scenario.
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EasyEd
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Post by EasyEd on May 3, 2011 18:22:59 GMT -5
Had Chrysler and GM failed they would have gone into bankrupcy, just like any other company in the same situation. Then they would have emerged from bankrupcy just like other companies do but on a more sustainable footing.
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Post by jerseyhoya34 on May 3, 2011 18:44:44 GMT -5
It will be news to GM and Chrysler-watchers, our court system, investors, and their employees alike that those companies did not go into bankruptcy. Chrysler filed on 4/11/09, and GM on 6/1/09 to reorganize under Chapter 11 of the Bankruptcy Code.
GM's reorganization particularly involved ditching of unprofitable brands/car lines. The record thus far suggests that both companies have emerged on a more sustainable footing.
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EasyEd
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Post by EasyEd on May 3, 2011 19:07:35 GMT -5
My bad.
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Post by hoyawatcher on May 3, 2011 19:15:41 GMT -5
It will be news to GM and Chrysler-watchers, our court system, investors, and their employees alike that those companies did not go into bankruptcy. Chrysler filed on 4/11/09, and GM on 6/1/09 to reorganize under Chapter 11 of the Bankruptcy Code. GM's reorganization particularly involved ditching of unprofitable brands/car lines. The record thus far suggests that both companies have emerged on a more sustainable footing. You are correct that GM and Chrysler did go into bankruptcy but it wasn't just to shed unprofitable lines. GM and Chrysler went into bankruptcy with $50 billion in taxpayer dollars contingent on a certain plan being dictated by the lender of last resort (the federal government). That plan as has been discussed crushed the stockholders (expected) and also secured bondholders who otherwise would have had more options and elevated a non-secured creditor (the unions) far above any place they would have had in a normal bankruptcy. In that scenario it is success on social or really rather political grounds more than economic grounds as Obama wanted to save union jobs AND union scale contracts to the best he could. He won the election and gets to reward the folks who got him there but the goal of this money of last resort was much more oriented on the "social" goals Poash discussed than economics/return which a normal Private Equity investment group would have driven. The corollary to this though is that the analysis that says it was this plan or GM and Chrysler simply went away is not correct. The alternative would have been an inordinately large but "normal" workout of the situation where the union contracts would have been much more in play and their ownership position much reduced if at all. You can argue whether that is good or bad for sure but it is definitely more a social or political goal than economics. FWIW most think that Obama wants the GM stock off the government books before the next election cycle really starts so I would expect that the $10 B number or something close to it will become a real loss sometime soon. Also anyone who thinks that Ford would not have survived if GM and Chrysler did cease to exist is not correct. With that amount of market share available they would have prospered. And recognize that the supply chain is now worldwide and they would have been able to find suppliers with ease.
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ksf42001
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Post by ksf42001 on May 3, 2011 19:16:10 GMT -5
Had Chrysler and GM failed they would have gone into bankrupcy, just like any other company in the same situation. Then they would have emerged from bankrupcy just like other companies do but on a more sustainable footing. As Ambassabor stated, they did go into bankruptcy, just a quicky gov't-ordained prepackaged bankruptcy. The difference is - a June 2009 bankruptcy with gov't guaranteed of warranties and a bailed out GMAC was almost assured of success, while a November 2008 bankruptcy was anything but. Just ask Circuit City who declared chapter 11 that month with a much better debt/asset ratio than GM/Chrysler did. I remember a poll stating that 80% of the public absolutely wouldn't purchase a new car from a bankrupt company because of warranty concerns. The other 20% who would consider it would have had to pay cash with no GMAC and few banks lending money at that time.
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SirSaxa
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Post by SirSaxa on May 5, 2011 10:49:09 GMT -5
G.M.’s Earnings Triple in First QuarterExcerpts DETROIT — General Motors said Thursday that it made $3.2 billion in the first quarter, more than triple what it earned in the same period a year ago and its fifth consecutive profitable quarter.
Without the charges and gains, the automaker earned about $1.7 billion, its best quarterly performance in more than a decade. In the quarter a year ago, G.M. reported a profit of $865 million.
The company’s core North American operations, once a huge trouble spot, reported earnings before interest and taxes of $2.9 billion, compared to $1.2 billion a year ago.
The strong first-quarter earnings resulted from steadily improving vehicle sales in the United States, and a considerably lower debt load since G.M. emerged from its government-sponsored bankruptcy in 2009.
The earnings follow a $4.7 billion profit in 2010, the first profitable year for G.M., a Detroit automaker, since 2004. Suggesting the Government takeover and restructuring of GM was anything other than a HUGE win for the US economy sounds more and more like arguments only the birthers could make. BTW, the fact that FORD was able to do something similar without Govt. aid deserves recognition -- and some kind of award. The market is already rewarding them with market share gains. Bravo Alan Mulally!
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hoyainspirit
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When life puts that voodoo on me, music is my gris-gris.
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Post by hoyainspirit on May 5, 2011 11:38:03 GMT -5
G.M.’s Earnings Triple in First QuarterExcerpts DETROIT — General Motors said Thursday that it made $3.2 billion in the first quarter, more than triple what it earned in the same period a year ago and its fifth consecutive profitable quarter.
Without the charges and gains, the automaker earned about $1.7 billion, its best quarterly performance in more than a decade. In the quarter a year ago, G.M. reported a profit of $865 million.
The company’s core North American operations, once a huge trouble spot, reported earnings before interest and taxes of $2.9 billion, compared to $1.2 billion a year ago.
The strong first-quarter earnings resulted from steadily improving vehicle sales in the United States, and a considerably lower debt load since G.M. emerged from its government-sponsored bankruptcy in 2009.
The earnings follow a $4.7 billion profit in 2010, the first profitable year for G.M., a Detroit automaker, since 2004. Suggesting the Government takeover and restructuring of GM was anything other than a HUGE win for the US economy sounds more and more like arguments only the birthers could make. BTW, the fact that FORD was able to do something similar without Govt. aid deserves recognition -- and some kind of award. The market is already rewarding them with market share gains. Bravo Alan Mulally! Thanx for all the timely links you consistently provide to the board. I've especially enjoyed the ones in the Bin Laden thread, also.
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theexorcist
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Post by theexorcist on May 5, 2011 13:30:44 GMT -5
G.M.’s Earnings Triple in First QuarterExcerpts DETROIT — General Motors said Thursday that it made $3.2 billion in the first quarter, more than triple what it earned in the same period a year ago and its fifth consecutive profitable quarter.
Without the charges and gains, the automaker earned about $1.7 billion, its best quarterly performance in more than a decade. In the quarter a year ago, G.M. reported a profit of $865 million.
The company’s core North American operations, once a huge trouble spot, reported earnings before interest and taxes of $2.9 billion, compared to $1.2 billion a year ago.
The strong first-quarter earnings resulted from steadily improving vehicle sales in the United States, and a considerably lower debt load since G.M. emerged from its government-sponsored bankruptcy in 2009.
The earnings follow a $4.7 billion profit in 2010, the first profitable year for G.M., a Detroit automaker, since 2004. Suggesting the Government takeover and restructuring of GM was anything other than a HUGE win for the US economy sounds more and more like arguments only the birthers could make. BTW, the fact that FORD was able to do something similar without Govt. aid deserves recognition -- and some kind of award. The market is already rewarding them with market share gains. Bravo Alan Mulally! I opposed the bailout then on principle, and I opposed it now on principle. In the future, CEOs, especially auto company CEOs, will make decisions based on the fact that lots of people got a bailout. This creates a screwed-up incentive structure - if you can argue that you're too big to fail, you have a precedent for the US government bailing you out. Those CEOs may take more dangerous risks as a result. GM succeeded. But they could have failed. The next company that the federal government considers taking over - and this will happen, since the precedent's been set - may be a more dangerous bet. Everyone has their feeling of where the government should be. I think that this isn't inherently governmental work and that the feds should never get close to this again.
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Post by jerseyhoya34 on May 5, 2011 13:32:51 GMT -5
How is this any different than any calculation that a businessman now makes based on our perverted tax [cut] system and related government intervention in the free market? A difference in degree but perhaps not in kind.
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theexorcist
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Post by theexorcist on May 5, 2011 13:49:37 GMT -5
How is this any different than any calculation that a businessman now makes based on our perverted tax [cut] system and related government intervention in the free market? A difference in degree but perhaps not in kind. Because my tax dollars are paying for the bailout, and the more businesses that get a bailout, the more I feel like my retirement money is being invested in penny stocks. Great possibility of return, but high risk.
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SirSaxa
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Post by SirSaxa on May 5, 2011 13:58:41 GMT -5
In the future, CEOs, especially auto company CEOs, will make decisions based on the fact that lots of people got a bailout. This creates a screwed-up incentive structure - if you can argue that you're too big to fail, you have a precedent for the US government bailing you out. Those CEOs may take more dangerous risks as a result. An interesting point exorcist, but I think that applies more to the financial sector. Regardless of what any politicians may claim, if we run into another catastrophic financial crisis, the banks will get bailed out again. Ergo, regulation and resolution authority is critical, no matter how much the banks may be fighting it now -- after they were successfully bailed out two years ago. Short memories. Back to GM... I don't think your scenario holds. Why? Because when the Govt. took over failing GM, the management team was blown out. And all their long term profit sharing, stock options, and stock holdings in the company were reduced to... Zero. That doesn't equate to a scenario that encourages CEO's to go for broke.
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ksf42001
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Post by ksf42001 on May 5, 2011 14:28:07 GMT -5
Back to GM... I don't think your scenario holds. Why? Because when the Govt. took over failing GM, the management team was blown out. And all their long term profit sharing, stock options, and stock holdings in the company were reduced to... Zero. That doesn't equate to a scenario that encourages CEO's to go for broke. That's assuming that CEOs/executives think that long term. Using the financial sector, I'm sure the companies knew that there was a 10% chance everything would blow up. But they were willing to take that 10% risk to make $10 billion a year, then play it safe (leveraging up to 12x instead of 32x) and only making $1 billion. I personally feel like any company/industry that meets the systemic risk criteria of "too big to fail" (maybe financial institutions worth more than 75 billion) should have to pay a percentage of their profits into a bailout fund that'll take care of the next crisis that's bound to happen sooner or later.
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