

How Did GM Pay Back Its Bailout So Fast? Well, It Didn't... - mcantor
http://reason.com/blog/2010/04/30/reasontv-how-did-gm-pay-back-i

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stretchwithme
If you lend me $50 billion from your slush fund and let me convert most of it
into worthless stock, I will then turn around and pay off the balance with
interest.

We have too much auto building capacity for this economic environment and the
least competent should have been shut down. That's how the rest of the economy
works.

GM got a sweetheart deal for totally political reasons while thousands of
other companies employing many more workers being paid realistic wages and
benefits went bankrupt.

Do the rest of us get paid to sit on our asses at "job banks" playing cards
when we bet on the wrong employer or career? What is so sacrosanct about this
particular work or group of workers?

~~~
josefresco
"thousands of other companies employing many more workers"

Ok so what's your short list of companies who employ roughly 250 thousand
workers (and effect countless more) that could have used a bailout as well?

~~~
bmj
I find I can argue either side here. If GM closes a single auto plant, that
does have a significant impact on that locale because so many people are out
of work in a single stroke (see PGH when the steel industry died). 1000 small
businesses shuttering their windows across the country still leaves quite a
few people unemployed, but the ripple effects may not be as debilitating to
each community.

~~~
stretchwithme
When we make decisions and they don't work out, we must bear the consequences.
We choose where to live and what work to do.

Its a shame but its not a justification for making other people, who nothing
to do with making those decisions, suffer the consequences.

~~~
bmj
I agree--I was simply exploring another side to the argument.

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kgermino
This would probably be funny if it wasn't my tax money that paid for their
incompetence. Quick poll: How many founders on HN have had their failed
startups bailed out by the Feds? (I suspect I know the answer)

~~~
th0ma5
well, one can't conflate a failed business with network effects. arguably gm
stopped being just a business a long time ago, and is more an army of
subcontractors. perhaps managing these kinds of arrangements, and dealing with
complexity and large blocks capital in the global market, is what we should be
talking about, imho.

~~~
jacoblyles
It's more aptly described as an army of union workers who contribute boatloads
to political parties.

It may be more efficient for the feds to cut out the charade. They should
close down all the union shops and give all the union workers full welfare for
life. The resulting bill might be cheaper than the economic distortions caused
by political policies that favor unions in the marketplace.

~~~
DrSprout
American industry is failing primarily because safety standards are higher
than abroad.

GM failed because they designed shoddy cars. The Unions had nothing to do with
that (especially given that most of the union workers were rank-and-file
factory workers who built exactly the shitty cars they were told to.)

~~~
jdminhbg
"American industry is failing primarily because safety standards are higher
than abroad."

Then why can Toyota and Honda successfully build cars in the US?

~~~
lenley
Well we've seen how overrated Toyota actually has been -- in terms of their
safety record etc.

~~~
potatolicious
Bull. Toyota's mistake could have happened to _anyone_ \- all of the work
relating to individual parts are done by subcontractors, and you would be
surprised at how many subcontractors all of the large manufacturers share.

While the problem is certainly inexcusable, the gigantic hate-on that Toyota
went through from Congress and the general public is mostly political. The
anti-Toyota and andti-import sentiment is largely driven by politicians trying
desperately to raise the desirability of American cars by spreading FUD about
Japanese ones.

~~~
mistermann
Exactly.....I've owned Toyota's exclusively for about 20 years now, with no
problems. And I've never bought new, always used. Anyone that says American
quality is comparable to Japanese is simply making it up. It's not that
Americans can't do it, it's just that they don't.

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S_A_P
Conspiracy Theory: Since the government has such a hefty stake in GM, how does
it boost sales? Tarnish the current #1 vehicle maker with a federal inquiry
into safety issues...

hmmm.

~~~
Splines
I'm of the opinion that there are competitive-research groups under each car
maker that exist for this sole reason.

Someone in another thread replied that such activity would border on the
illegal, but I don't buy it.

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ergo98
This really is kind of silly and is people engaging in nonsense math.

GM was expected to need {X} amount of cash to remain in business. They got
that, with the government converting a large percentage to an equity holding
(essentially like converting preferred shares). GM was expected to quickly
burn through the escrow account as they bought off dealers, closed plants,
etc.

Yet somehow GM didn't burn through it. They ended up returning the cash. By
every possible real way of considering it, they paid off the loan.

Imagine that your friend gave you $20 for lunch, but agreed that he'd take
your iPhone 3GS in return for $17 of it. Lunch comes to $16 so you give him
his $3 back immediately -- did you not just pay him back? Does the money not
count because it wasn't churned through a cycle first?

Stupid math.

~~~
anamax
> Imagine that your friend gave you $20 for lunch, but agreed that he'd take
> your iPhone 3GS in return for $17 of it.

Except in this case GM wasn't worth what the feds paid to buy parts of it.

How do I know? Because no one was willing to pay what the US govt paid. It
still isn't.

The ownership stake is basically collateral. If they eventually make enough
money, they'll pay it back and we'll release the collateral. Just like any
other loan.

~~~
philwelch
It's not collateral, it's an indication that, just like passenger rail, the
market can't support automobile manufacturing in this country[1] so instead
we'll use nationalization and massive government subsidies to save otherwise
useless jobs[2].

[1] Except for Ford.

[2] Specifically, jobs belonging to unionized left-wing voters in Michigan,
who need to be shored up during the upcoming elections, since they were far
more in Hillary's base than Obama's during the primary.

Also, the salaries for those jobs go to union dues, which go to the UAW's
political contributions, which go to the Democrats. So basically, the
Democrats just voted themselves more public money. Not that the Republicans
wouldn't do the same in their place, but....

