GM pays back US & Canadian loans way early

[fielderLS3]

Originally Posted by nova

Take any country thats relatively closed to foreign commerce and you're going to see a weak economy. Vietnam, Cambodia, Burma, even the red Chinese were completely stuck economically until they started trading with other countries and letting other countries do business there.

I think you are purposely missing my point. There is a big difference between isolationism and ownership. Doing business overseas does not require selling your company to foreign owners. (In fact, when you do that, you are not really doing business overseas anymore, are you.)

I am all for doing business overseas. Opens markets are a great thing. It means having more markets open to sell your products in. But to do this, you have to have a product to sell. Having no business means nothing to sell. This is why China is booming. They own companies that are exporting to other markets.

This also requires a two way street for it to work, and we should demand reciprocity. Ironically, it is the Chinese and Japanese and Korean markets that are closed (to us). This is why our companies are suffering. Markets we are letting in are not letting us in.

Originally Posted by nova

If GM had been sold to say the Chinese, name one thing that they could pack off to China that couldn't be replaced here by some industrious business and their ideas?

Now this is zero-sum thinking. Why does GM have to be packed off for said industrious business and their ideas to exist? Would it not be better to have both companies here employing people?

Originally Posted by nova

You think they're gonna pack up the Renaissance Center and move it to Beijing or what?

Um, yes....not physically of course, but they could easily move into a new building in Beijing, and simply clear out the Renaissance center, leaving it vacant. It's not the building that matters, it is the company that lives there.

Originally Posted by nova

This isn't going to be a popular thing to say but it is what it is. If anything, GM has spent the last 20-30 years destroying an obscene amount of wealth. Between monetary losses, depreciation and several other factors, GM made nearly $500 billion turn into a pumpkin over that period with nothing to show for it. If you're constantly pouring money into an enterprise that you don't know how to make money with, you're not doing anyone any favors. In fact, systematically destroying wealth is how you end up in Bankruptcy.

In fact thats what makes liberal bankruptcy laws so great for an economy. People can fail and the economic assets they were squandering can be transferred to someone who just might know WTF they're doing.

Not sure about the $500 billion figure, but otherwise, agreed. No reason that those assets that were being squandered have to move off shore though, and if they are, then you are still not benefiting from them because you don't have them.

Originally Posted by nova

That way of thinking hasn't been true since wealth was defined as gold and silver coins sitting in a chest in somebodies closet. Yeah, in 1780 when that was true, if you bought all your stuff from overseas, it was gone and not coming back but we don't operate that way and haven't in a long time.

In fact the whole value system of trade is based on the fact that wealth is created every time trade happens simply by virtue of the fact that each person is trading away something of less value than what they recieve.

We create wealth on a daily basis by the judicious use of capital to implement IDEAS. We use those ideas to find things that we do better than other people and maximize our utility and our wealth generating capability.

Wealth has never been defined strictly as gold and silver. Those were merely forms of currency that were used to quantify wealth, no different from paper money besides the fact that it can't be counterfeited or printed (i.e. inflated). If someone had discovered a huge gold mine back during the days of the gold standard that doubled the amount of gold overnight, the wealth of the country wouldn't have doubled overnight, the gold simply would have lost half its unit value overnight. Wealth isn't a zero sum game, but there is a limit to how fast it can be produced.

Wealth is not "created" as much as it is "produced," and it is produced either by physical work (building something useful) at a fundamental level, and investing and making a profit on building and then selling something useful on a higher level. The actual wealth comes about from the process of producing what is traded. The trade itself does not produce wealth, because as far as the larger economy is concerned, what each side is trading is of equal, not unequal value. The value to each individual may be unequal (example, you pay $35,000 or a Camaro because having the Camaro is worth more to you then having the $35,000), but as far as the larger economy is concerned, 1 Camaro=$35,000. The wealth in this case goes to GM and its employees who produced it. If GM is moved overseas, the ability to produce wealth by building cars goes with it. With production goes wealth

Sure, you can buy stock in a foreign company (assuming you are allowed to trade on the foreign exchange), but the amount of the wealth investors get out of the company is small compared to the wages paid out to employees. The value of the stock is the value of the company itself, not the value of what the company produces. A GM worker makes much more money working on the assembly line than he could off owning whatever GM stock he could afford. Unless you have many millions in assets (or are working on behalf of someone who does), you can't make a living off the stock the market.

Anyway nova, hopefully you find the post and respond to it. I am actually enjoying the debate. The insights and ideas from a different point of view are making me think about my own position. I actually do agree with some of what you are saying to varying extents.

[Craig]

Wow, as usual the silence of the GM apologists (including the MODERATORS of this site, who should be ASHAMED of themselves for the example they are setting) is DEAFENING when confronted with the FACTS.

The following link is to a report by the Office of the Special Inspector General For the Troubled Asset Relief Program (TARP)

http://www.sigtarp.gov/reports/audit...gram_Funds.pdf

Take particular note starting on page 5. GM was given $49.5 billion dollars in accordance with the TARP program. Roughly $19 billion of this disbursement was given prior to bankruptcy and the remaining funds were dispersed during bankruptcy. What’s more (p. 5), “As of November 18, 2009, GM had used about $35.8 billion (72 percent) of the TARP funds…” The document then details how this money was spent. I won’t bore you on the details, but most of the money was spent to cover operating costs.

Regarding the $30.1 billion dispersed during the bankruptcy, a portion of the proceeds of this loan were placed in an escrow account. The escrow account was designed to ensure that the Treasury department could oversee the use of funds. The amount of funds in the escrow account totaled roughly $16.5 billion. GM used a portion of these funds, $2.8 billion, to resolve Delphi’s bankruptcy. This left a remaining balance in escrow of $13.7 billion. Further, as the report indicates (p. 6), “GM officials stated that they intend to seek release of additional escrow funds to repay its outstanding $6.7 billion loan to Treasury and $1.3 billion to the Canadian government.”

So let's summarize.

GM received $49.5 billion — $14.5 billion pre-bankruptcy and $30.1 during bankruptcy.

Of the $30.1 billion, the $16.4 billion was placed in an escrow account.

$2.8 billion in the escrow account was used to resolve Delphi’s bankruptcy thus reducing the escrow account to $13.7 billion.

In exchange for the disbursement of $49.5 billion, the government received:

60% stake in the new GM.
$7.1 billion in interest bearing debt ($0.4 billion was paid back in July 2009).
$2.1 billion of preferred stock.

Through TARP, the government gave GM $49.5 billion in exchange for a mixture of debt and equity. The government can therefore recoup its investment by selling shares of GM stock after the release of the IPO and through the repayment of the interest bearing bonds.

What GM has done is use the TARP money that was placed in escrow by the Treasury Department to repay the remaining interest bearing debt of $6.7 billion. Given that this money was not paid for with profits earned by the company (since of course as of yet THERE ARE NO PROFITS) it is effectively a debt-for-equity swap, not a loan repayment. In other words, the Treasury approved the repayment of the loan with the escrow funds and the government therefore hopes to recover the remainder of their investment by selling common stock after GM’s initial public offering that is intended to take place this year.

Put a little more simply, this repayment of interest bearing loans was paid for with UNSPENT BAILOUT MONEY PROVIDED BY THE US TAXPAYER that was previously sitting in the aforementioned escrow account. This is NOTHING more than an ACCOUNTING GIMMICK for the SOLE purpose of PR. This is the equivalent of a consumer claiming to have "paid down" debt by transferring balances from one credit card to another.

Of course the response of the GM cheerleaders here is to simply attack the messengers, which sadly includes the moderators of this site. Yes I'm talking to you, Dragoneye (amongst others, you are certainly not the only one). Go ahead and make more inane comments about "tinfoil hats" worn by those of us "haters" who refuse to be spoon-fed smoke & mirrors from the GM PR department.

Make no mistake, I'm not challenging you to refute my arguments. I'm flat-out DEFYING you to. But alas, you've taken the higher ground and are done with all this. For those of you unfamiliar with the higher ground, it's that place where charlatans run to and hide when their BS is called out for what it is.

The facts speak for themselves. They have not been disputed. They cannot be disputed. But of course you and the rest will simply believe what you want to believe, and will shut your eyes and ears to anyone who says otherwise. Make no mistake, I love my Camaro as much as anybody on this site, ANYBODY. Mine was bought brand new in September 2001 and almost nine years later I still drive it every single day. The valves tick, the t-tops leak, the dash rattles, the leather is disintigrating, the paint is bubbling, and only three of the speakers still work. Yet I love it, and I will continue to own and drive it until the day the wheels fall right off of it. The difference between me and some (CERTAINLY not ALL) of the other fanboys, err "enthusiasts" on the site is I realize that just because someone tells me what I want to hear, doesn't mean that they're not completely and totally FOS.

[Craig]

Originally Posted by robertway

As an aside, this just in: http://www.foxnews.com/politics/2010...h-advertising/

Wow, thanks for this link. All the more confirmation for what I and a handful of others have been saying, with no legitimate rebuttal forthcoming apparantly.

General Motors is running ads on all the major networks this week claiming it has repaid its bailout from the taxpayers "in full." But the claim isn't standing up to scrutiny from lawmakers and government watchdogs who have found that the automaker was able to repay the bailout money only by dipping into a separate pot of bailout funds.

The TV spot may land GM in hot water with the Federal Trade Commission over its truth-in-advertising laws, which prohibit ads that are "likely to mislead consumers."

"We have repaid our government loans in full — with interest — five years ahead of the original schedule," says Ed Whitacre, chairman and CEO of General Motors Company, asking Americans to give the bankrupt company another look.

But a top Senate Republican has accused GM of misleading taxpayers about the loan repayment, saying the struggling auto giant was able to repay a $6.7 billion bailout loan only by using other bailout funds in a special escrow account.

Iowa Sen. Chuck Grassley's charge was backed up by the inspector general for the bailout — also known as the Trouble Asset Relief Program, or TARP. Watchdog Neil Barofsky told Fox News, as well as the Senate Finance Committee, that General Motors used bailout money to pay back the federal government.

"It appears to be nothing more than an elaborate TARP money shuffle," Grassley, the ranking Republican on the Senate Finance Committee, said in a letter Thursday to Treasury Secretary Timothy Geithner.

But we'll all take it with a grain of salt. I'm sure all these critics are just Mustang drivers.

EDIT: Confirmation from GM's own documents. See page 26

http://www.faqs.org/sec-filings/0911...8-K/dex992.htm

[a_Username]

Originally Posted by Supermans

Not true, the Government is still in direct control. All the people put in power are still there.. This administration is very calculated, even though their focus is on wallstreet now after the health care takeover, GM has not disappeared off their radar completely. As should be obvious by this publicity stunt.

As I recall, the board of directors is the group that is realistically in control. StuntmanMike said it best:

Originally Posted by StuntmanMike

The government "owns" GM about as much as anyone holding U.S. Bonds "owns" the country.

In other words, not at all.

[Hylton]

Originally Posted by truth411

For Hylton
The best post in this thread. Bottom line the 6.7 billion that the Gov. gave GM has been returned to the Gov!!! all that there is left is for GM to go public and have the Gov. sell its 61% ownership. then case closed.

Xanthos explanation is not what happened here. You, he and others here think that GM has reduced it's debt by this transaction but I believe it hasn't.

You believe that GM paid back money it had sitting in the bank and I am not going to convince you otherwise so let's just see how this shakes out in the next few days.

[Hylton]

Originally Posted by a_Username

As I recall, the board of directors is the group that is realistically in control. StuntmanMike said it best:

Who do you think has the final say regarding board selection? Who can add or remove board members anytime they want? Answer - the owners of a corporation. Owning bonds makes you a creditor, not an owner.

[Supermans]

Originally Posted by Hylton

The money wasn't sitting in a GM account somewhere. It was a draw down. In other words they did not reduce their debt one penny by doing this.

It's hard to believe people are looking at this as a win for GM and our Government. Believing in propaganda hook line and sinker. Money was shuffled and they do it under the banner the debt has been re-paid...It is laughable..

Originally Posted by Hylton

Who do you think has the final say regarding board selection? Who can add or remove board members anytime they want? Answer - the owners of a corporation. Owning bonds makes you a creditor, not an owner.

THis is 100% accurate. The current owner of the corporation with over 60% of the share's is...Ta da..The US government. UNtil they relinquish that power they can move GM, rename GM, close down any portion of GM they want, and vote who stays and who goes now. They have done all this by the way already if you needed any proof of the power given to them.

[Cmicasa the Great XvX]

Originally Posted by truth411

argh... they returned unused bailout money back to the government , so whats the problem???

GM got, possibly, a helluva win here with this "pay-off." There are people who now... even before the IPO... who think that GM is already free of any governmental involvement. It's amazing that the ignorance of this country serves to hurt at the same time as help the General.

People here can try and argue that the loan was paid back via the Escrow fund set up by the Tarp loan... And they may well be right. But how is that any different than a situation where as:

1) I go to a Bank last year in June 2009.. and get a Credit line for $7 million for future operations of my Business
2) Bank gives me 'til June of 2014 to pay the Line off... with a hypothetical 3% interest rate to kick in 1 year after the initiation of the loan. (Think 0% interest for 12 Months)
3) The money sits in Escrow earning a interest itself.
4) I decide "WE DON'T NEED THE MONEY... We will pay it (the Principal) back today (April 21, 2010)... with the interest earned (I think GM paid back 8% interest ) during that 8 months... effectively wiping out the debt sitting on the books as an asset.

[Supermans]

Originally Posted by Dragoneye

If I could facepalm any harder, I'd give myself a concussion.

Why some people have to be so....Oh, nevermind.
I'm done in here. Wear your tinfoil hats and your self-righteous clothes...

...Just God forbid any of you come into positions of power in this country.

*sigh*

Dragoneye,

There is no need to get all worked up here. This is a forum, and healthy discussions of current events are a good thing for everyone. I left this site awhile ago due to the censorship policy in place about politics. That type of censorship is what this current administration wants by trying to implement "The Fairness Doctrine" and kill off talk radio by creating a bureaucracy to monitor and take action against radio stations that don't follow their rules of what to say. Much in the same manner they way your moderators have to follow the policy and ban people and delete posts here.

Most everyone has differing opinions of some sort and I guess you are asking why so many of us are "hard headed"? As for the "tin-foil hat's" comment, is that supposed to be code for people who fear everything the Government is doing? And then you throw in God forbid any of us come into "power in this country"?

Please elaborate on these points since what is it exactly you fear us "conservative's" would do if we were in power. I can tell you we would lower taxes, and de-crease Government control over everyones lives. Both of those events would stimulate the economy as history proves that it would. Us conservatives value what is written in the Constitution of the United States of America and uphold it's main doctrine that everybody has equal rights. Everybody has the right to life, liberty and the pursuit of happiness.

Now all this patriotism and upholding the constitution does not mean we don't take care of those less fortunate who cannot take care of themselves. Compassion and charity are always a part of the America we all live in.

Now back on topic. What I am afraid of is the Government telling me what kind of car I should be driving. And their definition of "should be" in reality means they don't want you to buy certain types of cars. In the past before they owned GM, they set out rules and regulations which caused them to spend lots more on R&R to improve efficiency. This is something that the "free market" would have taken care of regardless of Government intervention if left alone and if the people desired it. However the Government felt they know better than we do and regulations and CAFE standards were imposed.

Now I am leaving out the Union's and pension's and so forth since we all know what roll that played after workers started living longer and retirement check's kept rolling in. Not a bad deal for the workers, one that no company could NOT sustain in the long run if they have a few bad years..

Fast forward and this situation above occurs. Now the Government seizes the opportunity to take over and they do. It amazes me how many of you see this as harmless. Some see it as better than before. The hiring and firing of most in charge placing in power those with similar mindsets as those in control of Government. This only represents half of the countries population here and half of the stockholders party affiliation.. So that one half gets left out of any decision making.. Is that fair?

When GM was a part of the "free market", they had a better mix of people running the show who were not all geared toward one mindset. You can argue that their focus was on gas guzzling SUV's and gas guzzling other vehicles, however at that time that is what the people wanted since gas prices were low. Their competition overseas was outselling them in the more gas friendly vehicles and that was the fault of the management. However in time, they would have come out of that down-spell on their own if they were able to manage their funds better and did not have the Union's stranglehold in contracts to deal with and other factors etc.

Overall I am in the belief system that the Government does not know how to run things well. Show me any proof of that statement otherwise.. So Since the Government cannot and has not run any company better than the private sector ever could, then why such blind faith to whatever the Government does and wants to cram down our throats. That is all..

http://www.foxnews.com/politics/2010...h-advertising/

A good article..

[Cmicasa the Great XvX]

Originally Posted by Unfair

I dont think you are following, now they are still in debt for the same amount with TARP.

this move deleted zero debt, from what I understand.
Yes they paid the U.S loan, I know this... but they didn't use their money.

U don't seem to be the one understanding. THE TARP FUNDS WERE PART OF THE MONEY OWED. THEY WERE GIVEN BACK. It's no different than when the banks gave back their funds. All this talk is nothing more than rhetoric for haters of the Obama Administration and AMERICAN Industry.

and of course there are also the Ford Fans here....

[Blackbean]

The money that GM paid back was part of the original amount that they borrowed from the government.The 6.6 billion was in an escrow account and they had 5 years to pay it back.They paid it back with $700 million in interest,early.
The remaining $52billion was converted into stock,and will be repaid over this 5 year window.
They got rid of Pontiac and Saturn divisions,and the industry as a whole has lost 400,000 jobs.So recovery is costing alot more than just taxpayer money.
Better to prune the tree back than let the whole thing die.

[Supermans]

Originally Posted by Craig

Wow, as usual the silence of the GM apologists (including the MODERATORS of this site, who should be ASHAMED of themselves for the example they are setting) is DEAFENING when confronted with the FACTS.

The following link is to a report by the Office of the Special Inspector General For the Troubled Asset Relief Program (TARP)

http://www.sigtarp.gov/reports/audit...gram_Funds.pdf

Take particular note starting on page 5. GM was given $49.5 billion dollars in accordance with the TARP program. Roughly $19 billion of this disbursement was given prior to bankruptcy and the remaining funds were dispersed during bankruptcy. What’s more (p. 5), “As of November 18, 2009, GM had used about $35.8 billion (72 percent) of the TARP funds…” The document then details how this money was spent. I won’t bore you on the details, but most of the money was spent to cover operating costs.

Regarding the $30.1 billion dispersed during the bankruptcy, a portion of the proceeds of this loan were placed in an escrow account. The escrow account was designed to ensure that the Treasury department could oversee the use of funds. The amount of funds in the escrow account totaled roughly $16.5 billion. GM used a portion of these funds, $2.8 billion, to resolve Delphi’s bankruptcy. This left a remaining balance in escrow of $13.7 billion. Further, as the report indicates (p. 6), “GM officials stated that they intend to seek release of additional escrow funds to repay its outstanding $6.7 billion loan to Treasury and $1.3 billion to the Canadian government.”

So let's summarize.

GM received $49.5 billion — $14.5 billion pre-bankruptcy and $30.1 during bankruptcy.

Of the $30.1 billion, the $16.4 billion was placed in an escrow account.

$2.8 billion in the escrow account was used to resolve Delphi’s bankruptcy thus reducing the escrow account to $13.7 billion.

In exchange for the disbursement of $49.5 billion, the government received:

60% stake in the new GM.
$7.1 billion in interest bearing debt ($0.4 billion was paid back in July 2009).
$2.1 billion of preferred stock.

Through TARP, the government gave GM $49.5 billion in exchange for a mixture of debt and equity. The government can therefore recoup its investment by selling shares of GM stock after the release of the IPO and through the repayment of the interest bearing bonds.

What GM has done is use the TARP money that was placed in escrow by the Treasury Department to repay the remaining interest bearing debt of $6.7 billion. Given that this money was not paid for with profits earned by the company (since of course as of yet THERE ARE NO PROFITS) it is effectively a debt-for-equity swap, not a loan repayment. In other words, the Treasury approved the repayment of the loan with the escrow funds and the government therefore hopes to recover the remainder of their investment by selling common stock after GM’s initial public offering that is intended to take place this year.

Put a little more simply, this repayment of interest bearing loans was paid for with UNSPENT BAILOUT MONEY PROVIDED BY THE US TAXPAYER that was previously sitting in the aforementioned escrow account. This is NOTHING more than an ACCOUNTING GIMMICK for the SOLE purpose of PR. This is the equivalent of a consumer claiming to have "paid down" debt by transferring balances from one credit card to another.

Of course the response of the GM cheerleaders here is to simply attack the messengers, which sadly includes the moderators of this site. Yes I'm talking to you, Dragoneye (amongst others, you are certainly not the only one). Go ahead and make more inane comments about "tinfoil hats" worn by those of us "haters" who refuse to be spoon-fed smoke & mirrors from the GM PR department.

Make no mistake, I'm not challenging you to refute my arguments. I'm flat-out DEFYING you to. But alas, you've taken the higher ground and are done with all this. For those of you unfamiliar with the higher ground, it's that place where charlatans run to and hide when their BS is called out for what it is.

The facts speak for themselves. They have not been disputed. They cannot be disputed. But of course you and the rest will simply believe what you want to believe, and will shut your eyes and ears to anyone who says otherwise. Make no mistake, I love my Camaro as much as anybody on this site, ANYBODY. Mine was bought brand new in September 2001 and almost nine years later I still drive it every single day. The valves tick, the t-tops leak, the dash rattles, the leather is disintigrating, the paint is bubbling, and only three of the speakers still work. Yet I love it, and I will continue to own and drive it until the day the wheels fall right off of it. The difference between me and some (CERTAINLY not ALL) of the other fanboys, err "enthusiasts" on the site is I realize that just because someone tells me what I want to hear, doesn't mean that they're not completely and totally FOS.

I cannot dispute what has been said here. I still love you Dragoneye We just have some differing viewpoints, that's all.

[mhood]

I don't understand how you can blast "Government Motors" while driving a 1SS. Doesn't the obvious hypocrisy bother you? Personally, I've just about had it with Faux Nuz, Talk Radio Conservative rants and having it infect my favorite car forum. Can't you take your cut and paste arguments to Politico and give it a rest here?

[Supermans]

Originally Posted by mhood

I don't understand how you can blast "Government Motors" while driving a 1SS. Doesn't the obvious hypocrisy bother you? Personally, I've just about had it with Faux Nuz, Talk Radio Conservative rants and having it infect my favorite car forum. Can't you take your cut and past arguments to Politico and give it a rest here?

I bought my Camaro 1SS before the Government takeover. However I am considering buying a Chevy Volt since I'm not anti "fuel efficiency" being a conservative. Like I posted above, I just believe that the free market would have created fuel efficient vehicles on their own if the market demanded them. However so far the market has not demanded it in the way environmentalists would like. So Government steps in since they know better how we should live our lives while they parade around in private jets and don't want any ugly wind energy to be in their own backyards..That's the only hypocrisy I see here. So your point is that if I buy a GM vehicle even if I'm a conservative, I have to become a liberal by agreeing with every liberal view now that liberals run the show ? I think not.