Posts Tagged ‘Government Motors’

German Government Nixes Opel Funding

Without other sources of money, U.S. taxpayers will continue to underwrite German jobs. GM is in a difficult political position.

by Ken Zino on Jun.11, 2010

Bruederle said he was convinced that GM has "sufficient funds" to restructure.

The German central government has rejected Opel’s application for loan guarantees, in spite of the fact that €8.5 billion was given to other automakers last year in the European Union to help them get through tough economic times. Opel received nothing.

Opel is currently surviving the ongoing Great Recession and the subsequent collapse of  auto markets only because of the largesse of U.S. and Canadian taxpayers who bailed out parent General Motors. This puts GM in a difficult political position on both sides of the Atlantic ocean.  And the European market forecast is grim. Most think this year it will be in the 14 to 15 million unit range, down from 15.9 million in 2009.

In the latest development of the ongoing saga, Opel was caught in a squabble that has weakened the coalition government of Chancellor Angela Merkel. German Economic Minister Rainer Bruederle denied GM €1.1 billion (~$1.2 billion) in loan guarantees after six months of work by General Motors on an Opel restructuring that obtained plant closings and other concessions from labor unions. Opel estimates it needs €3.3 billion, but some estimates are higher, including one from the UK government at €3.7 billion. Others are higher still.

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Bruederle is a Free Democrat, the minority party in Merkel’s fragile government, which came about after voters – read taxpayers – turned out some of her ruling party’s among other members in the election last September in the midst of the Opel bailout negotiations. Merkel had supported a takeover by Magna, but the GM board rejected that last November, in an unexpected move that was an embarrassment to Germany’s ruling party. (See Strategic Risk for GM was too high to Sell Opel) (more…)

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GM Pays Back Loans from U.S. Treasury and Canada

This is only a small portion due to taxpayers, on the hook for roughly $50 billion, and need an IPO to succeed for the rest.

by Ken Zino on Apr.21, 2010

Still working for the taxpayers - U.S. and Canadian.

In a ceremony at GM’s Fairfax, Kansas plant late this morning, Chairman and CEO Ed Whitacre said that GM has made its final payment of $5.8 billion to the U.S. Treasury and Export Development Canada, paying back the cash part of its government loans in full, and ahead of schedule.

This confirmed news reports earlier this week that the company would do so in an attempt to remove the right wing stigma of “Government Motors” from the vocabulary of critics and more importantly potential buyers.

Ken Zino, editor of  TDB, had an exclusive report – see Limbaugh Carrier Airs GM Loan Repayment Ad – about how a right wing talk radio station revealed the payback ahead of the announcement by running a taxpayer paid spot, many versions of which are now airing on TV and radio stations. Presumably, print ads will follow tomorrow.

The announcement came along with the promise of an investment of $257 million at the Fairfax and Detroit Hamtramck assembly centers.

The money will prepare Fairfax to build the next generation Chevrolet Malibu, and make Detroit Hamtramck a second source for Malibu. This is an optimistic step taken to “ensure that Chevrolet can meet demand” for its new mid-size sedan.

Whether such demand appears remains to be seen.

However, in fairness, GM’s recent product launches have been more successful than the previous ones leading up to its bankruptcy last year.

GM is able to repay the taxpayers in full, with interest, ahead of schedule, because more customers are buying vehicles such as the Chevrolet Malibu and Buick LaCrosse “we build here in Fairfax,” said Whitacre.

Follow the money

The U.S., Canadian, and Ontario governments, as part of the launch of the new GM, provided controversial loans of $8.4 billion and took large equity stakes in the new company. Today’s payment of $5.8 billion ($4.7 billion to the U.S. Treasury and $C1.1 billion to Export Development Canada) completes the payback of these loans, but does not get taxpayers or GM off the hook.

Under the loan terms, GM had until 2015 to repay the cash part of the loan it closed out today. Overall, this return of what now totals ~$8.4 billion is only a small portion of the actual amount due to taxpayers, who fronted roughly $50 billion in the U.S. alone. For the balance due, taxpayers instead own a 61% stake in the privately held company, and a successful public offering or IPO remains crucial to the government getting its money back – as it subsequently sells or attempts to sell the stock to private investors.

Multiple studies, of course,  have said that taxpayers will never recover what was actually invested in GM. See Taxpayers Will Take Big Losses on Auto Bailouts.

However,  the same was said about an earlier taxpayer investment in Chrysler Corporation, under the pugnacious Lido Anthony Iacocca, who paid back every cent with interest.

(more…)

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Chrysler Group Loses $3.8 billion in 2009

However, company claims Q1 profit based on lower costs.

by Ken Zino on Apr.21, 2010

Chrysler is struggling with weaning itself off profit sapping incentives while it attempts to peddle an aging product line.

Taxpayer owners in Canada and the U.S. of Chrysler Group received mixed news this morning as the reorganized company posted an operating profit of $143 million during the first three months of 2010, but also posted a large loss for 2009.

Chrysler, managed by 20%-owner Fiat SpA, attributed the positive development to reduced  costs, as well as revenue from the newly introduced Ram heavy-duty pickup truck.

Revenue rose to $9.7 billion in the first quarter, plus 2.7% from the final three months of 2009, Chrysler said in a statement.

Chrysler reported a net loss of $197 million in the first quarter, compared to a net loss of $2.69 billion in the final three months of last year.

“This positive operating result in the first quarter is a concrete indication to our customers, dealers and suppliers that the 2010 targets we have set for ourselves are achievable,” said Sergio Marchionne, Chief Executive, Officer, Chrysler Group LLC, who also has his hands full as head of loss making  Fiat. (€21 million loss vs. €411 million loss for Q1 2009.)

Chrysler said it lost $3.8 billion on revenue of $17.7 billion after its emergence from bankruptcy last June 10 and through the end of 2009. This staggering  number includes $1.4 billion in so-called goodwill, which is posted on the positive side of the ledger, one of those intangible calls by accountants.

It was during the reorganization that Fiat was granted its 20% ownership for a paltry $320 million assigned to its intellectual property in a controversial transaction that saw $15 billion in government support. As a result, Canadian taxpayers now own 2.46% of Chrysler Group. U.S. taxpayers hold 9.85%.

Fiat has the option to increase its stake contingent on government loads being repaid and the  introduction of small car technology, among other terms.

Sales remain problematic at the still struggling automaker

Worldwide vehicle shipments in Q1 were 380,000, which included U.S. vehicle shipments of 268,000, both figures representing an increase of 3% versus Q4 2009. Chrysler Group vehicle sales in the U.S. dropped 5.3% even  though industry sale rose 16% during the first quarter. Market share improved to 9.1% from 8.1% Q4 2009, and to 13.7% Canada from 11.6% percent in Q4 2009.

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Government Concludes, Yet Again, Taxpayers Won’t Get Money Back

GAO says GM, Chrysler won’t be valuable enough.

by Paul A. Eisenstein on Nov.03, 2009

Is that our tax money under the hood? Then-candidate Obama tours a Chrysler plant.

Is that our tax money under the hood? Then-candidate Obama tours a Chrysler plant.

Despite an increasingly optimistic outlook for the U.S. auto industry, taxpayers shouldn’t expect to recover the $80 billion of their tax dollars that have been invested in the survival of General Motors and Chrysler, according to government analysts.

A new report by the General Accounting Office contends that even when the two automakers were healthy, they simply wouldn’t have been worth enough for the government to recover its investment once it sells off its 61% stake in GM and 10% share of Chrysler.

This is not the first time such a conclusion has been reached as Ken Zino has previously reported. In fact, the GAO report appears to be a rehash of  a report released in September  by the Congressional Oversight Panel.

Getting the valuation of the two companies up to a profitable level is even less likely now, according to the GAO, a nonpartisan agency that serves as the investigative arm of Congress.

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“Treasury is unlikely to recover the entirety of its investment in Chrysler or GM, given that the companies’ values would have to grow substantially above what they have been in the past,” said a GAO summary of its latest findings.

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Opponents’ Options Dwindling as GM Gets Ready to Exit Bankruptcy

Judge rejects appeal; is asked to terminate 38 dealers.

by Paul A. Eisenstein on Jul.08, 2009

With little option left for opponents, the new GM could be back in business as early as Thursday afternoon.

With little option left for opponents, the new GM could be back in business as early as Thursday afternoon.

General Motors is getting closer to its official rebirth.  Barring an unforeseen setback, the maker should complete its so-called “363 Sale,” by the end of this week, and emerge a leaner and more efficient maker with significantly less than the crushing debt that drove it into bankruptcy.

A federal bankruptcy judge rejected demands by opponents to the GM reorganization plan for a quick Appeals Court hearing.  That leaves little likelihood that even if they eventually get to be heard, critics of the automaker’s plan would be able to stop – or reverse – its reorganization, which will result in a “new” General Motors owned by the U.S. Treasury, a union health care plan, the Canadian and Ontario governments, and a consortium of lenders who traded debt for equity.

On Sunday evening, Judge Robert Gerber issued a ruling in favor of the sale of GM’s “good” assets, a plan that would leave other assets, including dozens of unneeded plants, to be sold off and used to pay a portion of the old company’s debts.  The magistrate, however, put in place a four-day stay, allowing opponents time to raise objections.

Crash Resistant!

Crash Resistant!

Similar concerns briefly halted the re-emergence of Chrysler, but the deal was allowed to move ahead when the U.S. Supreme Court declined to hear an appeal.

Judge Gerber’s stay will pass at noon, Thursday, and the 363 sale could be completed shortly thereafter.  The White House had originally given a deadline of July 10th for completing GM’s passage through the bankruptcy process.  After that, the government warned, it would pull the financial support the automaker needed to stay in business. In all, GM is expected to have received more than $50 billion in federal aid.

(more…)

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Q&A: General Motors CEO Fritz Henderson

On government oversight, "Government Motors" boycotts, Lee Iacocca - and his own future at GM.

by Paul A. Eisenstein on Jun.24, 2009

Operating on a short leash: GM CEO Fritz Henderson doesn't have much time to prove himself.

Operating on a short leash: GM CEO Fritz Henderson doesn't have much time to prove himself.

He was supposed to be the numbers guy, quietly sitting in the background, figuring out how to make things work.  But the world turned upside-down for Frederick A. “Fritz” Henderson, when, on March 31st, the White House drove General Motors Chairman Rick Wagoner into an ignominious and unexpected retirement.

The company Henderson inherited as GM’s new CEO was facing a bleak future.  Long struggling to halt steady declines in sales and market share, the automaker was buried under a mountain of debt and burning through billions in cash each month.  A short-term infusion of federal loan money was clearly not enough to sustain GM, but from the moment he took the top office at the corporate offices, in Detroit’s Renaissance Center, it became obvious that the only likely salvation would come through a Chapter 11 bankruptcy reorganization – something Wagoner had simply been unable to accept.

Ironically, the 50-year-old Henderson had a career path that largely echoed that of his predecessor, down to the Harvard MBA and assignments managing GM’s operations in places like Europe and Brazil.  But perhaps one of Henderson’s most important postings was in China, one of the few true success stories GM can point to in recent years.

Subscribe to TheDetroitBureau.comOn June 1st, to the surprise of no one, GM declared bankruptcy, effectively wrapping up the history of the 101-year-old company that was once as much a symbol of American might as the eagle and the star-spangled banner.  With the Obama Administration’s help and guidance, Henderson hopes to steer the maker through the courts and emerge, in as little as 60 to 90 days, as a “new General Motors,” one the new CEO promised would be “a leaner, quicker, more customer, completely product-focused Company.”

Here, TheDetroitBureau.com’s Bureau Chief Paul A. Eisenstein speaks to Henderson to get an update on the bankruptcy process, a sense of how much the White House is trying to manage GM, whether Henderson is worried about a threatened boycott of “Government Motors” products – and whether he will survive the next round of management cuts now being planned for GM.

(more…)

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Right Wing threatens to launch boycott of “Government Motors.”

Will the call to action gain traction - or backfire by sending import-oriented liberals to GM showrooms?

by Paul A. Eisenstein on Jun.04, 2009

GM Boycott?We live, it’s often pointed out, in a polarized society, and few things, of late, have been more divisive than the debate over the federal bailout of General Motors and Chrysler.

When first proposed, late last year, surveys found a solid majority of Americans opposed to using billions of taxpayer dollars to prop up the two financially floundering manufacturers.  And though that position is beginning to soften, there are still “certain parts of the country that do not like the concept,” concedes GM Chief Financial Officer Ray Young.

In fact, among the hardcore right wing, that opposition appears to be increasing, for any number of reasons, not all of which is specifically due to the issues of saving the automakers.  Nonetheless, the bailout is triggering a backlash that has some arch-conservatives calling for an all-out boycott of the makers, and especially of “Government Motors,” as critics call it, which will emerge from bankruptcy with the Treasury Department holding more than 60% of the “new” GM’s stock.

Among those who have given voice to the idea of a boycott is the conservative host Hugh Hewitt, who made the bailout a pet peeve on his nationally-syndicated talk radio show, as well as in the blog he posts on the website, Townhall.com.

Subscribe to TheDetroitBureau.com“In the two days since the nationalization of GM was announced, the callers and e-mailers to my program have been 10 to 1 against the Obamaization of the American car business,” contended a June 3rd  posting, by Hewitt, who added that, “This is a decision that must be reversed. GM must be denationalized.”

(more…)

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Government Motors

Will the White House be an active or passive shareholder?

by TheDetroitBureau’s team on Jun.01, 2009

"My administration feels we need to switch from 18 to 19-inch wheels..." Will the White House really sit on the sidelines, as promised, or exercise a day-to-day role in managing the "new" GM?

"My administration feels we need to switch from 18 to 19-inch wheels..." Will the White House really sit on the sidelines, as promised, or exercise a day-to-day role in managing the "new" GM?

Though the corporate logo never appeared on the FBI’s Most Wanted list, the U.S. government long viewed General Motors as one of the country’s biggest public enemies.

Back in the 1960s, when the automaker controlled more than half the American auto market, the government began a long-running, but ultimately futile, anti-trust effort to break GM up.  It hauled the maker into court to try to force the recall of millions of midsize cars equipped with allegedly faulty brakes.  And time and time again, the government and GM lawyers battled over issues ranging from the environment to consumer rights.

After today, such protracted legal battles might no longer be necessary.  If General Motors emerges from the bankruptcy it will file for today, the federal government is expected to hold a 60% stake in the “new” GM.  The White House, the steward for the multi-billion dollar taxpayer investment, has already shown the power it can wield, when it ousted former CEO Rick Wagoner, in March, replacing him with the company’s current chief executive, Fritz Henderson.

But just how much control does the government actually intend to take?  Not much, insisted several senior White House officials, speaking on background, Sunday night.  The Obama Administration “does not intend to exert day-to-day control,” asserted one top member, despite holding a dominant share, and getting to not only name one of the reformed GM’s board members but influence the choice of others.  “The government,” said the official, “intends to be extremely disciplined in how it uses even these extremely limited rights.” (more…)

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Obama: Without Auto Company Bailout, Depression

President refutes the slur "Government Motors" and says domestic automakers are a strategic U.S. industry.

by Ken Zino on May.24, 2009

President Obama

"Our auto industry is the foundation for economies all across the Midwest, and ultimately, for the country as a whole."

President Obama defended Federal help for the auto industry in an interview with C-SPAN aired on Saturday morning.

The aid has been under attack in various forms since it was establish by President Bush late last year when the U.S. financial system collapsed from its wild speculative practices, bringing the economy down with it.

As a result, current vehicle sales haven’t been at such low levels for more than four decades, and show no signs of improving this year.

In response to a question from C-SPAN political editor Steve Scully about “Government Motors” the President said, “Well, you know – look we are trying to help an auto industry that is going through a combination of bad decision making over many years and an unprecedented crisis — or at least a crisis we haven’t seen since the 1930′s. And you know the economy is going to bounce back and we want to get out of the business of helping auto companies as quickly as we can. I have got more than enough to do without that…”

General Motors Corporation confirmed late Friday borrowed an additional $4 billion from taxpayers to maintain adequate liquidity as the company undergoes what it calls an “aggressive restructuring.” Total U.S. Treasury funding received by GM to date is now $19.4 billion. The amount is paltry compared to the ongoing bailouts of financial institutions, but all told the bailout is now shaping up to cost taxpayers about $45 billion, and rising.

The President went on to say that both banking and autos are strategic industries that require strategic decisions and intervention from the government because of  the ongoing economic crisis.

“Our auto industry is the foundation for economies all across the Midwest, and ultimately, for the country as a whole and had we allowed GM or Chrysler simply to liquidate that would have been a huge anti-stimulus on the economy as a whole, and could have dragged us even deeper into recession or even depression,” President Obama said.

“Ultimately, I think that GM is going to be a strong company and we are going to be pulling out as soon as the economy recovers and they’ve completed their restructuring,” Obama said.

As TDB reported Friday, nearly 40 Senators, including both Republicans and Democrats, lent their names to an amendment to an appropriations bill, sponsored by Kay Bailey Hutchison, a Republican from Texas, that would have blocked federal aid for the two makers if steps weren’t taken to ease the pain facing close to 2,000 dealers GM and Chrysler intend to fire as part of their restructuring plans. The Republican Party claims to help smaller businesses, and dealers are big political contributors.    (more…)

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