Wednesday, April 21, 2010
The Obama administration is happily talking about the repayment of $8.1 billion in U.S. and Canadian government loans by GM, ahead of schedule.
"This turnaround wasn't an accident of history," said White House economic adviser Larry Summers. "It was the result of considered and politically difficult decisions made by President Obama to provide GM and Chrysler — and indeed the auto industry — a lifeline, if they could demonstrate the will to reshape their businesses."Having been involved in a few workout situations, I have found that it is well and good to be pleased that there is forward progress, but that it is important never to lose sight of the broader context and plan. GM posted a $3.4 billion loss in Q4 2009, not all of it an operating loss, but it is difficult to know at this point whether GM can realistically generate sustained positive cash flow from operating activities. The hope in Washington, D.C., and in Detroit is obviously that profits are forthcoming and can be maintained, and in fact there is discussion of a public offering of GM stock later this year, contingent upon the company posting a profit.
Vice President Joe Biden said President Barack Obama "took a lot of heat" to keep GM alive. "And this has even exceeded our expectations."
Biden said GM is now in a better position to "make what the market demands: energy-efficient vehicles for a cleaner world."
Noting that it is a good thing that the talk of an IPO is just talk at this point (otherwise Vice President Biden and White House economic adviser Larry Summers might be in violation of securities laws governing the so-called "quiet period," instead of just being politicians trying to score political points), let's do another informal TigerHawk poll.
The foregoing poll and blog post is not an offer, or a solicitation of an offer, to buy or sell securities mentioned herein. Heh.
GM got a huge amount of debt removed from their balance sheet, didn't they? so they no longer have to pay interest on this debt. But GM gets to use the plant and equipment that was bought with this debt...
How can they not make a big profit?
How are GM's books being kept, TH? Are they using Generally Accepted Accounting Principles, or are they using ummm, how should we say it....more relaxed accounting rules, with the Government's blessing, to post profits?
Mad as Hell - you are correct about the debt levels. According to the AP article at the link, GM had $95 billion in debt on its balance sheet when it entered bankruptcy. Debt at FYE 2009 stood at $15.8 billion.
Sirius - there was another $9.5 billion from the Canadian and Ontario governments as well, according to the AP article.
An honest media would be questioning the honesty of the transactions between this administration and GM and Goldman-Sachs. The unions might find that there are others getting richer than they are.
Tonight is the kind of night where I do watch the white racists on MSNBC just to see what talking points they've been ordered to voice so as to divert attention from our Chicago style of corruption.
You can't make this up. There's a great post over on Coyote Blog here:
GM is using TARP bailout money (equity) to pay back its government loans (debt).
But the headline we see implies that the GM bailout is working.