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  • So How Is That Government-Run Auto Company Working Out?

    It’s been nearly a year since the Obama administration took the reins of General Motors, and if today’s headlines are any indication, things aren’t looking good for the troubled Detroit auto maker.

    First off, GM just isn’t making money. It posted a $4.3 billion loss for the second half 2009 – far from profitability, far from a government-led turnaround. The company claims it has a chance of “achieving profitability” in 2010, but keep in mind that GM is $50 billion in the hole to the American taxpayers, who paid for a bailout in 2009.

    And those taxpayers can’t recoup their losses until the U.S. investment in GM is sold, which won’t happen until someone actually wants to buy the company. With $4.3 billion in losses, don’t expect buyers to come running anytime soon.

    There’s more bad news for GM. The company is saddled with massively underfunded pension plans, and it needs to come up with $12.3 billion in payments into the plan within the next five years. According to a government report released yesterday, it’s uncertain whether GM will be able to make that payment. That’s not a hard conclusion to reach given today’s reported $4.3 billion in losses.

    More bad news for Americans. As The New York Times reports, “If either company’s plan [Chrysler or GM's] must be terminated, the government would become liable for paying benefits to hundreds of thousands of retirees.” That’s 650,000 GM retirees, to be exact.

    But wait, there’s more. Enter the United Auto Workers, which yesterday sued GM, claiming that the company owes a union-run health care fund $450 million.

    If you add it all up, that makes for a lot of financial obligations for a company that is already well below water, to the depths of about 20,000 leagues under the sea.

    So what happens if GM doesn’t make a profit and all of these liabilities end up sinking the company? More from The New York Times on the government report issued Tuesday:

    In the event that the companies [Chrysler or GM] do not return to profitability in a reasonable time frame, Treasury officials said that they will consider all commercial options for disposing of Treasury’s equity, including forcing the companies into liquidation.

    In other words, back to square one – an unprofitable company overburdened with expenses, in need of a government bailout.

    Last year, we wrote that the federal government’s ownership of GM was the wrong approach, and that it necessitated an exit strategy for the American taxpayer. Given where GM is now, an exit strategy would have been a good idea.

    In April 2009, President Barack Obama said, “I don’t want to run auto companies. … I’ve got more than enough to do.”

    At the time, GM was broken. Under President Obama’s leadership, the American taxpayer bought it. And all indications are that it’s not getting fixed anytime soon. Buyer’s remorse, anyone?

    Posted in Economics [slideshow_deploy]

    40 Responses to So How Is That Government-Run Auto Company Working Out?

    1. MJF, CT says:

      This is why the government should never take over anything. GM had bills and obligations that must now be taken care of by the new owners – you and me! The UAW should not be allowed to sue the government as the UAW is part owner of GM! Again, here we have a union fleecing the company and owners (again, you and me).

      GM should have gone into bankruptcy as any business in this state should. If it could not recover, close. The whole buy out hinged on the UAW and the workers so now, you have a failing, government run company that will keep pouring money into a sinking ship just to keep union workers employed. This whole scenario was illegal because the government used taxpayer money to purchase a business. There is no provision for the government to do this because it is not the government's job to take over businesses.

      As always, the taxpayer gets it in the end!

    2. Terri - California says:

      Hey! Don't worry about it….now that Obama owns it and passed the HC bill and can mandate we buy health insurance…he will just mandate that we all have to go buy a GM product!! Problem solved!

    3. Scott in Minneapolis says:

      Amazing. Give the Union half the company, allow them to continue to destroy the company, and they still sue for more money.

      Barack is amazing in his lust for all things Socialist/Communist/Marxist.

    4. Billie says:

      Under President Obama’s leadership, the American taxpayers were FORCED TO BUY IT. MJF said it: This whole scenario was illegal because the government used taxpayer money to purchase a business. NO PROVISION for government force to put on the people. If the Government had ethics, UAW or any government entity, wouldn't be allowed to sue!

    5. D.S.Iowa says:

      We can not keep bailing out GM ,the american people just can not afford it they need to be broken up and sold to the highest bidder so be it.Maybe there retirees need to face up and live like the rest of us have to day by dayThe government has no business trying no run G.M. or any other business.I do not believe they can run much of anything.

    6. MartomFl says:

      G.M. needs to get feed back from the ultimate consumer and build what the consumer wants not the government, because they do not know what the hell their doing any way…The Traverse,Malibu,Chevy truck are the best thing G.M. has going…Push on Chevy…you can do it.

    7. Ed Kimble, Columbia says:

      For any failed business, regardless of economic system, the absolute minimum requirement for reorganization is usually paring down and replacement of management (not done), salvage of the efficient and greatest investment areas, in this case the Saturn group and the small truck divisions (not done), and the sell off of the most costly, outmoded and inefficient divisions along with associated capital equipment, e.g. the Detroit and Defiance, Ohio groups, and divisions like Cadillac (not done). A change of bail out terms is definitely indicated.

    8. Larry Richardson---S says:

      Barry knows just about the same amount about running an auto company as he does about any facet of government !

    9. gayles says:

      The bailouts as in the earlier days with the railroads only seem to guarantee the company will not succeed. It also seems to foster a poverty/gimme more attitude on the part of the receiving company.

    10. Pingback: Heritage: Government Motors = MASSIVE FAIL | The Hayride

    11. Shane Childers says:

      G.M. Is a sinking ship and needs to either succeeds or fail the way any company does. Their products have been sub par for decades, name recognition and it's employees have kept the company limping along. They should have never got goverment money, Ford didn't they survived! I can see the goverment securing pentions, but G.M. Would have to pay back somehow.

    12. TruthSeeker, Columbu says:

      A college of mine is citing this article as an "Example of Socialistic Tendencies" by Obama. Would the readers of The Heritage agree that this article "proves" just that? I'm curious.

    13. William Downey, JD L says:

      GM (Government Motors) is in exactly the same position that it was when the President foisted the purchase on taxpayers. So it it was too big to fail last year which was a 'selling" point in the bailout, how come now its Ok to consider a liquidation?

    14. Steve - Fl. says:

      We need to revamp congress, the senate, and only allow them to hold office one term, unless they prove they know how to do there job, and that is , they work for the American public.U know when I get a job, they put me on a six month probation, why not them ??????????

    15. Viejoken, PHX, AZ says:

      It's time to let GM fail as should have happened before we spent all the money to revive a dead horse with it's greedy union rider. If Americans don't want to buy American then we shouldn't be required to keep the horse alive.

    16. Pete, Houston says:

      I would not be surprised to find out this whole thing was about moving the pension burden to the US taxpayer vs letting this company fail due to natural selection. I do not agree that the US taxpayer should pick up the future pension obligations.

    17. J. Daniel says:

      Will the biased media touch this story as November elections approach? I doubt it. But while they spin, we get to vote!

    18. Bill, Danville, VA says:

      The taxpayers will be repaid when the federal government sells the stock owned in GM. Let's think about that. Do I want to buy stock in GM? What happened to the former stockholders? They were left with nothing when the Obama administration stepped in. Even the secured bondholders were not protected. Why would I buy stock in a company that the government could again step in and make my stock worthless?

    19. RG Georgia says:

      GM has shed some weight in the loss of Pontiac, Olds, Saturn and Hummer. Would someone please tell me why they need TWO truck lines? Either drop Chevy trucks or drop GMC trucks. Is it the union doing this or some other reason? It may be a moot point anyway, but should have been done many years ago.

    20. networkgeek, Texas says:

      This was a mistake. All Americans took hits due to sub prime. Let evolution take it's course. Let GM declare bankrupcy and renegotiate it's contracts. Delaying the inveitable just means more money is thrown into this pit. If GM had a chance to declare bankrupcy, they may be in better shape. At least Lee Iaccoa did it right, and paid off teh govt ASAP.

    21. J Paige says:

      What's wrong with the free press in America? Answer: To many self anointed zealots at NBC, ABC, CBS were let loose to sell out this country.

      While the main street press partisans were busy patting themselves on the butt for kicking Bush out; they gave Obama a free pass into the White House. Now we have self-proclaimed socialists running Washington who will do more damage than a thousand Pearl Harbors!

    22. Al Smith says:

      How many of you voted for this Thug and his Henchman that were not elected. He is doing more damage to the US, Then you are getting what you voted for. As for running anything he did not, By the Nov. election more damage will be done than any chairman of a company, En-Ron, Bernie Maddoff, and all the Banking deals. The bankrupt of California, now you work but three days a week. HOW do you to buy a GM product? and pay for your neighbors Health Care while his 27 year old kid doesn't pay taxes. Welcome comrade CASE CLOSED

    23. mike fresno,ca says:

      This is the same government leadership that is now in charge of our nations healthcare. Maybe that explains the CEO of SEIU visits to the Whitehouse.Another uion deal in the making.

    24. Drew Page, IL says:

      I keep hearing about how we taxpayers "own" GM and Chrysler. I have a few questions as a "shareholder". Where are my stock certificates? I want to sell my shares now, who do I contact to redeem them?

      I want to initiate a class action lawsuit against the board of directors of these companies because they have violated their fiduciary responsibility under ERISA and have costs us "shareholders" billions of dollars. Will Eric Holder be willing to prosecute our case?

    25. Lloyd Scallan - New Orleans area says:

      Mark these words. We (the tax payer) will again bail-out GM and Chrysler. Obama will just say again, “it’s too big to fail”! Obama will use the next bail-out
      to save his UAW (more voters in 2012) and use this as further destruction to
      our entier economical system.

    26. TruthSeeker, Columbus OH says:

      A college of mine is citing this article as an “Example of Socialistic Tendencies” by Obama. Would the readers of The Heritage agree that this article “proves” just that? I’m curious.

    27. Ben C. Ann Arbor, MI says:

      Car companies come and go. How about Desoto? Nash? American Motors? et al. Saving what can’t be saved makes no sense. Goals have to be attainble otherwise its rainbow chasing. I live in Michigan near Detroit so their demise will affect me – but it is what it is. GM is a money pit that needs to be covered – and soon.

    28. Jeff, Rehoboth says:

      Certainly Obama has said over and over that he ‘owns’ GM. It’s one thing to say that we’ve put so mush cash into it that we want a say in how it’s run, and quite another to say we are the outright owners. (Keep in mind I’m not in favor of this)

      Can it really be that the American Taxpayer is liable for those pension benefits?

      Are we really the outright owners?

      Does this give any American legal standing to challenge the so-called ownership claim?

      As bad an idea as it was to bail out the auto companies, can it really be we ‘bought’ the pension obligations along with it?

      I had thought this language of “we own it” more rhetoric than reality.

      Were we on the right so anxious to spin this as Government Motors that we let him pull off this Union fast one? I don’t recall hearing about these obligations at the time…Did we help him?

    29. Rob, NJ says:

      How did you write that entire thing and leave out that the auto bailout was organized by the Bush Administration?

      Obama is hardly a great president, but the GOP has been hostile to conservative principles for at least a decade (No Child Left Behind, REAL ID Act, then-record spending, then-record deficits, etc, etc). Talking about this as if it's entirely Obama's fault seems unbalanced.

    30. Corky, Howey in the says:

      And you think Government run healthcare will fare any better? I think the tables will turn come this November. Maybe then, just MAYBE we'll get a Congress voted in that will put a stop to obama's spending.nightmare. Stop funding on the healthcare bill and close GM and tell the Unions they can move to the South Pole….OH, did I mention we'll build our Millitary and nukes back up to par again?

    31. John Clancy, Wyandot says:

      We need to organize every precinct in our country to change the senate and the house in November. Begin to work in your neighborhood now. The voting turnout must be overwhelmingly in favor of electing people who will go to Washington to serve the people.

      The present agenda and the present crop of prople in government must be turned out so that we can sell GM, repeal healthcare, and take our country from the brink.

    32. Pingback: Obama Motors – FAILURE… « Jacksonian Lawyer's Blog

    33. Rob, NJ says:

      I don't support government-run healthcare. But pretending that the GOP is any better than the Democrats doesn't do us any good. The GOP's position for the last 20 years has been "Yeah, we're big spenders and we like deficits, but it's not like conservatives have any choice. They have to vote for us, so we can do whatever we want."

      ObamaCare is almost identical to RomneyCare, right down to the individual mandate. If President Romney had proposed the healthcare reform, GOP congressmen would have voted for it, just like they voted for every big-government program Bush wanted. The only reason they voted against is that it was a Dem president who pushed it; the only principle they follow is partisan politics. The democrats are no better, of course, and I don't mean to imply that they are. But if we ever want anything like a return to conservative governance, we have to stop turning a blind eye to the way the GOP spits on conservative principles.

      And blasting Obama for the auto bailout, while ignoring that it was a Republican administration which organized that bailout, is just going along with the GOP attitude that conservatives have to vote for them, so they can do whatever they want.

    34. Robert Shrader, Ches says:

      I believe that part of GM and Chrysler's problem is that citizens like me will not buy a vehicle from a government-owned auto company. I will consider one of these cars as soon as the companies are privately owned again. The smartest thing the government can do is sell these companies. The IPO should go to those stockholders who lost out when the government took control.

    35. Jeanne Stotler, wood says:

      I drive a GM car, so do my son's, my parents did also. Hummer, Saturn were bad investments. We in this country got fascinated with japanese cars and with those from europe. I'll continue to buy USA made where I can, we can thank Clinton and Carter fro all this stuff going to other countries. Look inside you Gloria Vanderbilt jeans etc and see where they were made, it wasn't in USA .

    36. A. R., CA says:

      It is no surprise to 90% of us that govt.-run anything does poorly. The govt. is trying to get its hands into places it doesn't belong. We are not a dictatorial nation as Obama believes we can quickly become. The govt. should be concentrating on protecting us from Islamic extremists, our #1 enemy, and from illegal invasions, #2.

    37. Chris, Wisconsin says:

      I'm in the market for a new truck, but I won't consider a Chevy because of the government ownership. However, if they went back to private ownership, I'd buy one today.

    38. John, Michigan says:

      Name two entities that the federal government runs well…

      So why did they think they could run a car company?

    39. CM says:

      The U.S. Guaranteed these pension benefits years before the bailout.The whole defined benefits pension system in this country is a time bomb.Check out your state,city, or county pension for the unfunded portion. It is over 1BN here. That is the amount they promised but never saved for. Know how they fund it? They are bound by law to raise your taxes to fund every dime. The whole GM situation is a nightmare,but it's only the tip of the iceburg. The boneheads we have in almost every elected position have one problem,they can't do math.

    40. Jon says:

      So do any of you understand why our government is trying to discurage us all from buying a toyota after reading this? If you think any car company can have every line of its cars have all those problems in 6 months you better get off the dope.

      Government is at war with Japan again.

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