Latest GM Deal Is a Losing One for All US Taxpayers
Remember when the auto industry started crashing and the government came in and spent our money to prop it up? In 2009, we spent $50 billion on GM, to purchase just over 25% of the company -- 500 million shares. Then remember a few months ago, when President Obama campaigned hard on the premise that they had saved the auto industry? Joe Biden even illustriously cried from the podium at the Democratic National Convention, “Osama bin Laden is dead and General Motors is alive!”
So what’s all this news now about the U.S. Treasury selling off its GM shares at a loss to taxpayers? Didn’t GM already pay off their loans? President Obama praised them as a great example, and GM even said “thanks” to America in a commercial about it. Did they pay back the loans in full and with interest or did they not?
In April 2010, CNN Money reported that GM had repaid the last of its $6.7 billion loans to the U.S. and Canadian governments -- early! And with interest! Yay, the bailouts worked! Or something. The article briefly acknowledges that that loan was only “a fraction of the financial support that the federal government gave to GM … to stop it from going out of business,” and mentions that “taxpayers could recoup money from a possible sale of GM stock to the public in the future.”
GM paid back its straight up loan of $6.7 billion, but had yet to buy back the $50 billion in shares owned by the government. That wasn’t technically a “loan” since we got part ownership of the company, with the promise that they’d buy it back from us someday.
That someday is now, only GM isn’t paying us back the $50 billion we put in -- they’re only going to give us $25 billion or less, depending on how the market goes over the next year.
Taxpayers loaned General Motors $50 billion, and are getting less than $25 billion back. I know math is hard, but that’s a huge loss. And guess where it came from? Your paycheck. That is money you don’t have in your pocket because it was lost in a bad investment by your government.
But at least it created jobs and bolstered the manufacturing community, right? Well, according to GM’s own annual reports for 2011, they outsource two thirds of their jobs, and less than one in five vehicles are manufactured in the U.S.
GM wasn’t saved, the UAW was. Had the company been forced to declare bankruptcy and reorganize, investors could have taken the sum of the parts and potentially built a self-sustaining, job-creating, prosperous new GM. Instead we poured money down the drain to save the status quo and the union.
If GM couldn’t continue to operate “as is” in 2009, how are they going to do it in 2013? The government managed to prop up the failing company for a few years and it cost the taxpayers $25 billion. Was it worth it?
Do you think the auto industry bailout was a good idea?
Image via Images_of_Money/Flickr