Saturday, August 18, 2012

Truth About General Motors and the Bailout

Remember how the President keeps saying he saved the auto industry with the bailouts?  Well, a recent Bloomberg report says that 79% of General Motors' sales last month was government purchases.  That's right - taxpayer money buying vehicles made with taxpayer money.

In the month of June, GM sales figures were the highest since 2008 - up a whopping 16%.  Interestingly, those figures are greatly due to a 79% increase in fleet sales to none other than the federal government.  The government is buying more and more GM vehicles so in the next quarterly report they can talk about how great GM is doing and make it appear that the President saved them.  They're buying cars from the government owned car company and that makes it successful?  If you take away government sales, GM isn't doing so hot.

There is also the little detail of the $85 billion in bailout money, about $30 billion of which went to the UAW and the rest will never be repaid.  The bondholders for both Chrysler and GM got royally screwed in the deal while the unions made out like bandits.  The government has already sold its Chrysler shares at a loss of about $1.5 billion.  They still have about 500 million shares of GM stock that they need to sell at $53 apiece to recoup the $25 billion.  Right now GM stock is hovering at about $20.25 a share.  Oops.

There are new rumors about another government bailout of GM.  GM is not doing well and if the President gets re-elected then certainly it's possible he'll give them more money.  The government owns about 26% of the company already.  Maybe they should just be partners.

Bottom line is to pay attention to what's truly happening instead of what Mr. Obama and his campaign advisors tell us.  When something sounds too good to be true it usually is.  It seems the only people who made out at all in this wonderful bailout deal was the United Auto Workers.  They still have jobs.  But if they can't produce a product that is competitive in the world market how long will that last?  If President Obama gets re-elected - I'm guessing about 4 more years.

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