Topic: GM: Extra Pork in the Bailout Total

[rrocket]

I guess it DOES pay to be a government run company.....Government are experts at burying extra pork when the make bills, and it seems like with GM it's no different.

http://online.wsj.com/article/SB10001424052748704462704575590642149103202.html
http://www.thetruthaboutcars.com/page/3/


Perhaps one of the least-covered elements of the auto industry restructuring has been the numerous tax advantages GM has earned as a government-owned automaker. Unlike most bankruptcies, GM was allowed to hold onto some $16b of net operating loss credits (tax-loss carry-forwards), which can be used to offset future tax bills. Typically, companies that restructure in bankruptcy lose existing carry-forwards as the price of wiping out debt, but because the government is invested in GM, it decided to allow old tax losses to flow into the new company even as debt was left behind. In the latest update on this story, The Wall Street Journal notes that some $18.9b of GM’s carry-forwards were from the old company, and that the firm has a whopping $45.4b in future tax savings. And because carry-forwards can be banked up to 20 years before they are spent, GM will have to make massive profits before it starts actually paying taxes to the federal government. The government’s position:

    the profit-shielding tax credit makes the bailed-out companies more attractive to investors, and that the value of the benefit is greater than the lost tax payments, especially since the tax payments would not exist if the companies fail

Which is all well and good, but the reality is also that this practically doubles the taxpayers’ cost of bailing out GM. As a policy this makes sense for the reasons given (assuming the bailout was a foregone conclusion), but it would be nice if this “hidden charge” were at least noted on the bill.

[neil]

I know what you are saying, but it doesn't really double the cost, it eliminates future business tax revenue for the time being, but without it the company would no longer exist and several thousand taxpaying consumers would be out of work.

Im my mind the bigger issue is competitive advantage.  It's a break Ford wouldn't get, nor other US operations.

[rrocket]

I know what you are saying, but it doesn't really double the cost, it eliminates future business tax revenue for the time being, but without it the company would no longer exist and several thousand taxpaying consumers would be out of work.

Im my mind the bigger issue is competitive advantage.  It's a break Ford wouldn't get, nor other US operations.

But not having to pay income tax on $45 Billions is money taken away from the taxpayers.  So that's an added cost to the bailout....but this seems to have been done "on the down low".  And |I disagree.  If GM is showing profit, there is no reason they can't pay tax on it.

But yea...not fair for Ford...agreed.

[Shnak]

Ugh. I just wish that GM would die. They never should've been bailed out in the first place. Losing 'all those jobs' is a myth. You don't think Toyota/Honda/others car makers would jump at the opportunity to fill the gap left by GM ceasing to exist? They'd grab some of the factories, some of the employees, some of the parts manufacturers, etc, etc. The money & jobs wouldn't disappear, they'd go to other people, that's all.

[rrocket]

Ugh. I just wish that GM would die. They never should've been bailed out in the first place. Losing 'all those jobs' is a myth. You don't think Toyota/Honda/others car makers would jump at the opportunity to fill the gap left by GM ceasing to exist? They'd grab some of the factories, some of the employees, some of the parts manufacturers, etc, etc. The money & jobs wouldn't disappear, they'd go to other people, that's all.

You'll recall, once GM got the bailout money, one of the first things they did was close plants and lay-off workers.  So there are fewer jobs since the bailout.

[tpl]

Ugh. I just wish that GM would die. They never should've been bailed out in the first place. Losing 'all those jobs' is a myth. You don't think Toyota/Honda/others car makers would jump at the opportunity to fill the gap left by GM ceasing to exist? They'd grab some of the factories, some of the employees, some of the parts manufacturers, etc, etc. The money & jobs wouldn't disappear, they'd go to other people, that's all.

Honda and Co would NOT have grabbed the factories and employees in Ontario. If they had they would have inherited the CAW with them.  A particularly bizarre piece of law.

[rrocket]

Ugh. I just wish that GM would die. They never should've been bailed out in the first place. Losing 'all those jobs' is a myth. You don't think Toyota/Honda/others car makers would jump at the opportunity to fill the gap left by GM ceasing to exist? They'd grab some of the factories, some of the employees, some of the parts manufacturers, etc, etc. The money & jobs wouldn't disappear, they'd go to other people, that's all.

Honda and Co would NOT have grabbed the factories and employees in Ontario. If they had they would have inherited the CAW with them.  A particularly bizarre piece of law.

Don't think if they declare BK.  There is a tool shop right beside us.  It was a CAW-unionized plant.  They went BK.  New owners bought the tool shop.  Place is NOT unionized under new ownership.

Wonder how that works...

[Shnak]

Ugh. I just wish that GM would die. They never should've been bailed out in the first place. Losing 'all those jobs' is a myth. You don't think Toyota/Honda/others car makers would jump at the opportunity to fill the gap left by GM ceasing to exist? They'd grab some of the factories, some of the employees, some of the parts manufacturers, etc, etc. The money & jobs wouldn't disappear, they'd go to other people, that's all.

Honda and Co would NOT have grabbed the factories and employees in Ontario. If they had they would have inherited the CAW with them.  A particularly bizarre piece of law.

My point is that if GM disappears leaving behind a void of a few millions vehicles to sell, Honda/Toyota/co. would increase their production to match that void. That would mean expanding their NA operations. A good portion of the jobs lost in the GM death would be brought back by other car makers.

If there's a demand, someone's going to supply it. Free market.

[toolatecrew]

The point regarding other manufactures in particular Ford is a good one.

Ford did not take a bailout. Part of the bailout for GM was that the government effectivley forced the UAW/CAW to gve GM wage concessions. Concessions that they were not forced to give Ford. Now GM is effectivley being given tax free status for unlimited time or 45B in profit whichever comes first.

[neil]

Ugh. I just wish that GM would die. They never should've been bailed out in the first place. Losing 'all those jobs' is a myth. You don't think Toyota/Honda/others car makers would jump at the opportunity to fill the gap left by GM ceasing to exist? They'd grab some of the factories, some of the employees, some of the parts manufacturers, etc, etc. The money & jobs wouldn't disappear, they'd go to other people, that's all.

Ugh.  You are forgetting the hundreds of thousands of jobs depending on the product after it leaves the factory.  You have any idea the number of employees the average urban Chevy store has?

[Shnak]

Ugh. I just wish that GM would die. They never should've been bailed out in the first place. Losing 'all those jobs' is a myth. You don't think Toyota/Honda/others car makers would jump at the opportunity to fill the gap left by GM ceasing to exist? They'd grab some of the factories, some of the employees, some of the parts manufacturers, etc, etc. The money & jobs wouldn't disappear, they'd go to other people, that's all.

Ugh.  You are forgetting the hundreds of thousands of jobs depending on the product after it leaves the factory.  You have any idea the number of employees the average urban Chevy store has?

Why not take all that money and give it to Ford instead? They seem to know what they're doing. With the extra money, Ford would open new plants, increase production, hire more people, and give us more great products. If they're gonna waste our money, might as well give it to a company with a chance of making good use of it. I question the intelligence of anyone who thinks GM can use that money properly to get out of their century-old mess.

[rrocket]

Ugh. I just wish that GM would die. They never should've been bailed out in the first place. Losing 'all those jobs' is a myth. You don't think Toyota/Honda/others car makers would jump at the opportunity to fill the gap left by GM ceasing to exist? They'd grab some of the factories, some of the employees, some of the parts manufacturers, etc, etc. The money & jobs wouldn't disappear, they'd go to other people, that's all.

Ugh.  You are forgetting the hundreds of thousands of jobs depending on the product after it leaves the factory.  You have any idea the number of employees the average urban Chevy store has?

Why not take all that money and give it to Ford instead? They seem to know what they're doing. With the extra money, Ford would open new plants, increase production, hire more people, and give us more great products. If they're gonna waste our money, might as well give it to a company with a chance of making good use of it. I question the intelligence of anyone who thinks GM can use that money properly to get out of their century-old mess.

Or give that money for someone to open a new plant here.  Nissan, Hyundai, etc...

[Shnak]

Ugh. I just wish that GM would die. They never should've been bailed out in the first place. Losing 'all those jobs' is a myth. You don't think Toyota/Honda/others car makers would jump at the opportunity to fill the gap left by GM ceasing to exist? They'd grab some of the factories, some of the employees, some of the parts manufacturers, etc, etc. The money & jobs wouldn't disappear, they'd go to other people, that's all.

Ugh.  You are forgetting the hundreds of thousands of jobs depending on the product after it leaves the factory.  You have any idea the number of employees the average urban Chevy store has?

Why not take all that money and give it to Ford instead? They seem to know what they're doing. With the extra money, Ford would open new plants, increase production, hire more people, and give us more great products. If they're gonna waste our money, might as well give it to a company with a chance of making good use of it. I question the intelligence of anyone who thinks GM can use that money properly to get out of their century-old mess.

Or give that money for someone to open a new plant here.  Nissan, Hyundai, etc...

Sure, anybody but GM or Chrysler would've been fine by me. Those two companies have proven year after year they have no clue what they're doing. They don't deserve a dime of help. They should be left to die and whatever results from their death, tough luck. Workers left without a job will find jobs at other carmakers that are working harder to fill the void left by GM, those qualified enough, that is.

[neil]

Liddell said GM's earnings before taxes and interest could hit $13 billion annually if the industry returns to "mid-cycle sales" and with profit margins of 7 percent to 8 percent.

From The Detroit News: http://detroitnews.com/article/20101105/AUTO01/11050394/1148/auto01/GM-says-it-can-make-$13B-a-year#ixzz14QhFFntr

The bailout of GM, Chrysler Group LLC and auto finance companies will be "at a cost that will almost certainly be a small faction of even the most optimistic predictions," Bloom told an audience at George Washington University Law School today.

Earlier this month, the Treasury Department narrowed its predicted loss on the bailout to $17 billion, down from an initial projected loss of $44 billion in 2009. Bloom didn't specify how he much he thought taxpayers might lose.

He praised the efforts that GM and Chrysler have made to date.

"The talented and energetic directors and management teams at GM and Chrysler in full partnership with the UAW have already made a huge amount of progress," Bloom said.


From The Detroit News: http://detroitnews.com/article/20101029/AUTO01/10290436/1148/Auto-czar-praises-GM--Chrysler-progress#ixzz14QsOOly5

[rrocket]

Wow..."only" a projected $17 billion loss...LOL

[toolatecrew]

Liddell said GM's earnings before taxes and interest could hit $13 billion annually if the industry returns to "mid-cycle sales" and with profit margins of 7 percent to 8 percent.

From The Detroit News: http://detroitnews.com/article/20101105/AUTO01/11050394/1148/auto01/GM-says-it-can-make-$13B-a-year#ixzz14QhFFntr

The bailout of GM, Chrysler Group LLC and auto finance companies will be "at a cost that will almost certainly be a small faction of even the most optimistic predictions," Bloom told an audience at George Washington University Law School today.

Earlier this month, the Treasury Department narrowed its predicted loss on the bailout to $17 billion, down from an initial projected loss of $44 billion in 2009. Bloom didn't specify how he much he thought taxpayers might lose.

He praised the efforts that GM and Chrysler have made to date.

"The talented and energetic directors and management teams at GM and Chrysler in full partnership with the UAW have already made a huge amount of progress," Bloom said.


From The Detroit News: http://detroitnews.com/article/20101029/AUTO01/10290436/1148/Auto-czar-praises-GM--Chrysler-progress#ixzz14QsOOly5

LOSS? What LOSS?

I thought they had paid all the bailout back and that the IPO was going to recover all the money taxpayers had unwillingly invested?

[neil]

The Detroit News reported the Treasury will incur a hefty loss on the stock it will sell — between $3.9 billion and $5.4 billion.

The government has about 912 million shares after the split — and will have between 609 and 648 million after the IPO. It will have to sell the remainder at a price of $52.70 under a worst case scenario to break even.


From The Detroit News: http://detroitnews.com/article/20101103/AUTO01/11030439/1148/auto01/GM-launches-IPO-worth-up-to-$15.6B#ixzz14RkOJph2

I bought as much FoMoCo stock as I could get my hands on in March of 2009, @ under $2/share.  It hit a new 6 year high yesterday over $15, I think it's time to flip it into some cheap GMM stock.

[Erik]

Wow.
Just wow.

[TopGun]

Ugh. I just wish that GM would die. They never should've been bailed out in the first place. Losing 'all those jobs' is a myth. You don't think Toyota/Honda/others car makers would jump at the opportunity to fill the gap left by GM ceasing to exist? They'd grab some of the factories, some of the employees, some of the parts manufacturers, etc, etc. The money & jobs wouldn't disappear, they'd go to other people, that's all.

That's abundantly clear...as it's clear that many don't/can't  see the larger picture.  All the other posts make sense now.

Their Q3 net income was 2 Billion.  That same article is looking at generating free cash flows over $10 billion.  Just think of the tax revenue that kind of profitability generates (yes, yes, once they use up their tax treatments).

http://www.bloomberg.com/news/2010-11-04/gm-says-profit-before-interest-taxes-could-reach-19-billion-in-ipo-pitch.html

It's up to them to screw it up now...or not.

[toolatecrew]

Holy smoke and mirrors:

The Government projects a 4 to 5 billion dollar LOSS on the sale of the stockThe First 45 B in profit will generate NO tax revenue

Plus all the bailout and brankruptcy protection given to them helped them cut 10 Billion from their Labour costs..which sounds good until you realize that you now will not collect any income tax revenue on those 10 Billion in labour costs and pay out enemployment to all those people. Be conservative and put the income tax at 20% or 2 billion

So 5 billion stock loss + say 45 billion in loss tax on tax free profits +   2 billion more in loss of income tax.

When exactly are all these losses going to be recovered again?