Updated
A study authored by Thomas Hopkins, an economics professor at the Rochester Institute of Technology, and published by the National Taxpayers Union, claims that taxpayers kick in $12,200 for every GM vehicle sold in the U.S. And for every Chrysler vehicle sold here, the bill comes to a claimed $7,600.
Hopkins didn't use any terribly complicated math to come up with these figures. Rather, he's taking the bailout totals thus far ($50+ billion for GM, $13+ billion for Chrysler and $12+ billion for GMAC, which finances both of them) and dividing them by actual and projected sales for both companies for all of 2009 and 2010. Easy-peasy.
But possibly oversimplified. The study doesn't include either company's sales outside the U.S. Or the many and complicated financial obligations each automaker has. Nor does Hopkins have any apparent interest in the economic fallout that would have come from a total collapse of either GM or Chrysler... no one really knows how dark that reality might have been. But this is beyond the scope of what Hopkins is trying to accomplish, which seems to be to shed light on the true cost of propping up the weak, instead of bolstering the strong (er, the less weak).
Snippet: "Auto producers whose products American consumers find most appealing have been notably missing from the roster of bailout recipients. Our subsidies instead have gone to the poor performers, firms whose past management decisions proved faulty. As a result the bailout has created moral hazard problems, inadvertently handicapping the progress of stronger, non-subsidized producers. The problems extend beyond just the auto industry, as favored status for one financial company and its bank necessarily complicates prospects for non-subsidized rivals."
So the money's gone. The loans have been made. We own 61 percent of GM. All we can do now is hope the markets are in a buying mood at the initial public offering (IPO) for GM shares. That could come as soon as the fourth quarter of 2010, Ron Bloom, chair of the government's automotive task force told Reuters today.
rallyandbosox says:
06:08 PM, 11/18/09
The problem with Hopkins' forecast is that he assumes GM will regain its 22% market share which it had in 2008 and Chrysler will go up to 10%. There is a possibility that neither manufacturer is able to hit this mark. How did he find out that GMAC's bailout would be split 69% for GM and 31% for Chrysler?
I think the GAO summary suffices ""whether the reorganized Chrysler and GM will achieve long-term financial viability remains unclear."
bodyblue says:
06:51 PM, 11/18/09
I just threw up in my mouth.........here is 1487's company in all its glory. I bet GMs bondholders would have liked a bailout also.
hondacura4 says:
07:12 PM, 11/18/09
If I can get $12K off a CTS-V 6MT I'll buy one right now!
brn says:
07:19 PM, 11/18/09
"we're not exactly encouraged by GM's announcement on Tuesday that it would start paying back our loans with borrowed money."
If I borrowed $100 from you and it turned out I only needed $80. Is it a bad thing that I give $20 back right away?
eriches says:
07:29 PM, 11/18/09
@ brn: No, of course not.
(Also, I've made some edits to the entry, so my apologies for cutting that line of the main text. Didn't see your comment until I'd made my edits. Here's link to yesterday's post, which I cited in the line you reference: http://blogs.insideline.com/straightline/2009/11/gm-paying-back-loans-with-borrowed-money.html).
acbayard says:
07:42 PM, 11/18/09
Erin - should the study include Chrysler or GM's foreign performance?
It was my impression that those operations were generally quite compartmentalized and fiscally distinct from GM's North American operations, and in GM's example, even profitable (and therefore possibly hiding GM's under performance in the North American market).
efinils2 says:
08:15 PM, 11/18/09
I don't know about you guys, but I think that's a great picture; Edmunds should seriously consider selling some of these as prints!
bimmerjay says:
08:29 PM, 11/18/09
@hondacura4,
"If I can get $12K off a CTS-V 6MT I'll buy one right now!"
If you get an '09 that's not too far off - there's up to $6500 in rebates on the hood and TMV (in NorCal) is about $100 under invoice, that's $10,600 off MSRP!
It continues to warm my heart to see our tax dollars propping up a lumbering, bumbling, failing corporation(s) instead of going towards repairing our crumbling infrastructure, supporting education for our kids so they don't have to get auto manufacturing jobs, or the other 20,000 things this $50B could have been better spent on.
inlinesix says:
10:58 PM, 11/18/09
I like to see some spent on education.
bodyblue says:
07:12 AM, 11/19/09
I tend to give Mopar a teeny tiny break because of how the Daimler creeps raided the Chyrsler Corporation of all its cash, fired its talent after a series of breakthrough vehicles in the mid to late 90's then sold it to a bunch of investment hacks who hired the worst CEO of all time (Nardelli)...they just did not have a chance. As for GM...screw them.....they were arrogant and stupid and the market handed them their ass and the American tax payer had to bail them out with Chinese borrowed money.
roadburner says:
01:49 PM, 11/19/09
"It continues to warm my heart to see our tax dollars propping up a lumbering, bumbling, failing corporation(s) instead of going towards repairing our crumbling infrastructure, supporting education for our kids so they don't have to get auto manufacturing jobs, or the other 20,000 things this $50B could have been better spent on."
Hey, The Chosen One has to dance with the girl what brung him; it's a payoff to the UAW, pure and simple- and to hell with the taxpayers.
greenpony says:
05:32 PM, 11/19/09
Did he really need to conduct a study to conclude that Big Government's favoritism is handicapping the more successful companies? I've been saying this since it was first proposed!
Do you really take that kid who got 60% on his final exam and give him 30 extra points? How is that fair to the kid that got 90%, or even the one who got 80%?
roadburner says:
05:41 PM, 11/19/09
"Do you really take that kid who got 60% on his final exam and give him 30 extra points? How is that fair to the kid that got 90%, or even the one who got 80%?"
It's the New American Way- punish the successful and reward the incompetent.
cwc1 says:
07:28 PM, 11/19/09
A few points:
GM has made a few poor choices over the past two to three decades, by focusing too much on taking costs out of their mainstream vehicles with the result of dulling them down and losing competitiveness. This wasn't true of all their vehicles, but was for many of the ones they relied on to pay the bills.
But many of GM's problems were beyond its control. One of these was union thug bosses who strangled the life out of the company by extorting contractual obligations that they could not afford to pay at some point in the future. That future just came much sooner than anyone thought, when GM wasn't in a strong enough financial position to weather the recession that has been turned into a near depression.
We, the taxpayers do not "own" GM. That's a scam. Where are our stock certificates and ability to vote for its directors? Do we have any influence at all? NO. GM's board and executives are beholden to whoever happens to be in control of Washington's executive branch, which currently is Obama and his comrades. If/when GM is one day able to pay back its loans, are we the taxpayers going to get anything out of it? NO. Just as with all the other bailouts, and the incresing unfunded liabilities for entitlement programs, the funds were confiscated from not only our tax dollars, but right out of our wallets by inflating the currency supply and devaluing the dollar and setting the path for massive inflation in the future. When the government will claim to have made a profit if/when these bailout loans are paid back from all the various industries, our dollars will buy far less than they do even now.
By the way, what's with the site sign-in no longer working with browsers like Firefox? It lets me go through the motions, but doesn't retain the fact that I already signed in.
hondacura4 says:
07:45 PM, 11/19/09
"It continues to warm my heart to see our tax dollars propping up a lumbering, bumbling, failing corporation(s) instead of going towards repairing our crumbling infrastructure, supporting education for our kids so they don't have to get auto manufacturing jobs, or the other 20,000 things this $50B could have been better spent on."
BimmerJay, this is America where priorities are put on the back burner for larger more fashionable items.