Thanks Obama for giving the Unions $50 Billion, so they could launger it back to you and your Liberal buddies!!
In 2009, the Obama administration invested $50 billion (taxpayer) dollars in the failing American car maker General Motors. The president told the country that this investment (and the additional $30 billion to Chrysler and $5 billion to various parts manufacturers) was needed to save the economy from a total collapse.
Obama also predicted that the money would be paid back.
Let’s review the history of the $50 billion dollar GM bailout.
2008 – GM celebrates 100 years in business (earlier this month Chevrolet turned 100). Two months after the party, GM told the government that they needed billions of dollars in loans or the company was going under.
June 2009 – The administration says it will provide GM with the needed funds ($50 billion) but bankruptcy and cuts are required.
June 2009 – GM files for bankruptcy.
July 2009 – GM emerges from bankruptcy.
April of 2010 – GM’s Ed Whiteacre announces that GM has paid back loans made to the company by the US and Canadian governments.
Whiteacre was not lying. LOANS were paid back. Loans…not the $50 billion dollar investment. There is a difference.
The loans Whiteacre was speaking of were just a small portion of the $50 billion dollar bailout. In fact, they were less than 10 percent of the total package. And the sources of the money used to pay off those loans is also an important story.
Reason.tv provides a simple and graphic explanation of the facts of this reported payback of the loan.
November 18, 2010 – The NYSE is abuzz with talk of the new General Motors (GM) initial public offering. The old stock symbol GM would be back on the “Big Board” as the American auto giant tries to reinvent itself on the backs of the American taxpayer.
GM stock relaunched at a price of $33 per share. And President Obama announced that his grand plan is a success and that America will get back all of its investment.
On the day of the GM IPO, America did cash in some 400 million shares of GM stock, leaving us (the government) with just 500 million shares. Our stake in the ownership of the car company has now fallen from over 60 percent to 26 percent. And we (the government) have recouped $23.1 billion of the $50 spent. That was the good news.
This past week the Treasury Department released the news that losses from the auto industry bailouts are expected to INCREASE from $14.3 billion to $26.6 billion. The blame for this increased loss is placed squarely on the large drop in GM’s stock price.
On January 7th of this year, GM’s stock peaked at $38.98. As of Friday’s close, GM’s stock price had fallen to $21.67… a 35 percent drop from the IPO price.
In order for the American taxpayer to be made whole on the investment we made in just GM, the share price for the automaker needs to climb to $53, more than double the current price. Can GM’s stock rebound and jump from $21 to $53, providing the government a chance to “take a few chips off the table?” Most analysts will give you a simple two-word answer to that question: It’s doubtful.
What is standing in the way of GM’s stock price increasing and the government getting paid back for its investment? The government.
Industry experts cite the Obama administration’s aggressive push to increase the Corporate Average Fuel Economy Standards (CAFE Standards) from current levels of 30mpg to 55.4mpg by 2025. The government mandated increase would add an estimated $2000 to $2500 to the cost of every car in America. And automakers would also be saddled with huge spikes in costs to engineer their cars to meet the requirements.
The administration argues that increased costs to consumers will be offset by fuel savings over the long run. But the government numbers are based on the average cost of gasoline in 2011, with no projected increase in gas prices for 2025. It should be noted that the average price of a gallon of regular gasoline has increased from about $1.65 per gallon in Jan. 2009 to current levels near $3.50 per gallon.
Obama’s required increase in mileage for cars may provide some savings due to decreased fuel consumption, but fuel costs almost never decrease over a 10-15 year period. Therefore, it is highly unlikely that the increased cost per car can be recouped or offset by savings realized by increased fuel economy.
There are some positive signs in the car business and GM’s sales figures are showing progress. But is it enough?
Based on the economic data and analysis from many experts, the jury is still out.
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