That Whole "Saved GM" Thing

On Monday (9/3) VP Joe Biden (reported just about everywhere) told a group of about 3,500 people in Detroit "I've got a little bumper sticker for you: Osama bin Laden is dead and General Motors is alive."

Obviously, Biden is a car guy as his daily ride is a petrol-gulping, tire smoking '67 Corvette C2 (although he is currently not allowed to drive it). His dad had dealerships for both GM and Chrysler and he even knows what a bumper sticker is. It's a safe guess that Biden (that's not his car) is more in touch with the auto industry than Obama, but I digress.

The part of Joe’s quote I found most interesting was the part that suggests that GM is alive because of the bailouts initiated by Obama. There are a lot of problems with this and it’s pretty complicated.

First, it was reported in the NY Times in December of ’08, that president “W” was the one who initiated the plan to pump $13.4 billion into the companies to rescue the financial industry. That plan gave GM and Chrysler until March 31, 2009 to produce a plan for long-term profitability, including concessions from unions, creditors, suppliers and dealers. There’s no question that Obama was handed a big mess. One that would require solid business experience and a working knowledge of the auto industry—which he does not possess.

But the story doesn’t end there. In fact, it’s far from over even today. While the Obama campaign now likes to boast that saved GM, those words may come back to bite them.

In April of 2010 it was announced that GM was doing so well that it had paid back the nearly $6 billion in loans to the US and Canadian governments. But wait. The US government gave GM $52 billion, right? So where’s the other $46 billion? And wasn't it $13.4 billion to start?

Oh, didn’t they tell ya? That wasn’t a loan. Despite the payback, we the people still hold controlling interest in General Motors. (Sources? - Just search  “How much has GM paid back” or click here). Seems to me we ought to at least get shareholder pricing.

And now, two years later, there’s reason to believe that GM is in trouble again. It's beginning to look like that big sales spike GM reported a while back was more the result of Japanese automakers dealing with the tsunami than anything else. As it stands today, GM is again losing market share and counting greatly on China and India to pull them out of the slump. According to Investors.com, "Ford, which didn't take TARP funds, grabbed market share from GM and is now more profitable. Ironically, Ford for the first time in years has outsold GM in the number of cars bought by the federal government — although Washington still owns a huge stake in GM. Not exactly a vote of confidence."

So don’t believe everything hear. As a part owner in GM, you shouldn't assume this book is closed.

As for Chrysler, well, you don’t hear the current administration even mentioning that that automaker has paid back $7.6 billion worth of high-interest government loans—most likely because, after the bail outs, Chrysler is no longer a full-blooded American company. Controlling interest is now held by Fiat, making Chrysler more Italian than American.

Another car company that has benefited from the generosity of the current administration is Fisker, which received a $529 million loan guarantee from the federal government so they could build cars in Finland. You don’t hear ‘em bragging about that one much either.

Also See:

Insight: GM's Volt - The ugly math of low sales, high costs.

General Motors Is Headed For Bankruptcy -- Again