Wednesday, April 21, 2010

GM's repayment 

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."

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."
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.

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.

If GM has an IPO during 2010, would you consider purchasing shares of GM common stock?
Absolutely, put me down for 5,000 shares
Same as above; I expect a same-day double and flip
Maybe, depends on what the company looks like then
Probably not
GM? Wait, I'm a taxpayer, don't I already own shares?
pollcode.com free polls

The foregoing poll and blog post is not an offer, or a solicitation of an offer, to buy or sell securities mentioned herein. Heh.


By Blogger JPMcT, at Wed Apr 21, 09:04:00 PM:

I've already had my GM preferred stock stomped on illegally by Obama in favor of his unions.

No way on Earth I will ever be as big a sucker!!  

By Anonymous sirius_sir, at Wed Apr 21, 09:42:00 PM:

CBS News says the $8.1 billion represents merely 13% of the $52 billion in federal bailout money provided the automaker.

I'll wait to get excited when the remainder is paid back.  

By Anonymous Mad as Hell, at Wed Apr 21, 09:58:00 PM:

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?  

By Anonymous feeblemnd, at Wed Apr 21, 10:37:00 PM:

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?  

By Blogger Escort81, at Wed Apr 21, 11:29:00 PM:

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.  

By Blogger Georg Felis, at Thu Apr 22, 08:13:00 AM:

Heh. At this point, the poll shows a ratio of 142:6 Hell No:Yes/Maybe. There may be a sucker born every minute, but they seem to avoid this blog :)  

By Anonymous Anonymous, at Thu Apr 22, 09:57:00 AM:

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.  

By Anonymous Just Because I'm Paranoid, at Thu Apr 22, 03:19:00 PM:

You can't make this up. There's a great post over on Coyote Blog here:
Outright Fraud

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.  

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