GM – Does the US Govt. still “OWN” them? GM’s Phony Bailout Payback

Apparently, there are folks out there that believe the US Govt. is totally out of the GM ownership thing………  wonder where that came from?  Doing just some rudimentary research using Wikipedia (Obviously as a reference point to further research) and the power of Google, I was able to find with relative ease that, in fact, the US Govt still does own a sizable portion of GM.

Back in Dec. 2009, barely a year ago, the US Govt. owned roughly 70%, and since then, it is down to around 34% ownership.  So where are people seeing/reading that the US Govt is out of the picture at GM?  I think it comes from a misunderstanding of what happened since the Govt. takeover at GM.

So what happened?  First the US Govt. stepped in with ~$50 billion, then Canada also offered ~$10 billion, at which point the US Govt  decided that $50 billion was kind of a high loan amount, so it pared it down to just under $7 billion and used the vast bulk of the remainder bailout money to transfer to GM through the purchase of 60.8 percent equity stake in the company—arguably an even worse deal for taxpayers than the loan, given that the equity position requires them to bear the risk of the investment without any guaranteed return.  (The Canadian government likewise gave GM $1.4 billion as a pure loan, and another $8.1 billion for an 11.7 percent equity stake. The U.S. and Canadian government together own 72.5 percent of the company.)  Link: http://reason.com/archives/2010/04/27/gms-phony-bailout-payback

So there actually WAS roughly $50 billion dumped into GM by our govt; it was the loan  payback that the popular news agencies seem to focus their reports on, and actually the GM CEO boldly announced  that GM had repaid the Govt FULLY (And oh joy – 5 years ahead of schedule), he was only speaking of the $7 billion LOAN and NOT the equity shares in GM the US Govt still owns, so no “Full” payback has occurred at all.

(More from the Reason.com article)  But wait! Even that’s not the full story given that GM, which has not yet broken even, much less turned a profit, can’t pay even this puny amount from its own earnings.

So how is it paying it?

As it turns out, the Obama administration put $13.4 billion of the aid money as “working capital” in an escrow account when the company was in bankruptcy. The company is using this escrow money—government money—to pay back the government loan.

So let me get this straight, GM is repaying its Govt. loans with $$ in an escrow account that was funded by the US Govt?  WTF-Over?

(More from the Reason.com article) In short, GM is using government money to pay back government money to get more government money. And at a 2 percent lower interest rate at that.  This is a nifty scheme to refinance GM’s government debt—not pay it back!

So what about paying back the REST of the $50 billion (The equity shares)?  Will GM “accellerate” that payback?  Um…. no, in fact, GM, along with the US Govt has indefinitely “postponed” the rest of the payback until at some unknown time in the future when both GM and US Govt are ready……….. huh?

This story doesn’t even touch the landmark sweetheart deal the UAW got from the bankruptcy court – a deal that already has the UAW bosses swimming in $$ from the sale of the “NEW” GM shares; a deal never seen before in US history where union interests had more say than the actual American investors……..  And people wonder why the backlash of Nov. 2010 and will continue through 2012 at least.

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