Monday, April 26, 2010

Don’t believe the hype on GM’s loan repayment

The entire notion that GM can repay anything is laughable at best. Ed Whitacre, GM’s CEO, was all aglow this week in an op-ed piece in the Wall Street Journal as he described the great condition of the new company — or should I say our company since taxpayers own about 60 percent of it.

He forgot to mention the $52 billion bailout from the U.S. government, i.e. you and me, and $9.5 billion from the Canadian government. Then there’s that little matter of Congress allowing the company to change $43.3 billion of our $52 billion loan into equity (stock) in the company, therefore taking the loan off the books. This left just a $6.7 billion loan from the U.S. and $1.4 billion from Canada, which they recently have repaid with some of the $43.3 billion in equity investment. 

Look carefully at that last sentence again. We were literally repaid with our own money. I’ve seen shell games that were less rigged than that. To use a very technical economic term, we got taken to the cleaners.

I know Whitacre is pretty busy right now trying to stop this falling rock, so I guess it’s understandable that he forgot to mention the path of financial destruction that GM left behind. This also includes the financial beating that the GM bondholders took, plus the GM retirees and the pension funds that invested in them, all so the UAW could jump to the front of the line and get their money first. That is unprecedented. 

Posted via email from The Blue Pelican

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