Rattner: Taxpayers' loss from auto bailouts likely to be less than $10B

[Bozita]

Source: Detroit Free Press

Posted: 5:36 p.m. Nov. 15, 2010
Rattner: Taxpayers' loss from auto bailouts likely to be less than $10B
By GREG GARDNER
Free Press Business Writer

Taxpayers’ potential loss on the bailouts of General Motors and Chrysler will be less than $10 billion after GM’s initial public offering, the former head of President Barack Obama’s auto task force said today.

He also said GM’s initial public offering will be priced above the $26 to $29 range set forth in a Securities and Exchange Commission Nov. 3. The Free Press previously reported that GM is expected to raise its targeted price range early this week by no more than a few dollars.

“I’ve been saying for a while that I thought the government’s exposure in the auto bailout was in the $10 to $20 billion range,” Steven Rattner said today, speaking to the Automotive Press Association. But after the GM IPO, which is currently slated for Thursday, “I think this exposure is in the single digit billion range, and arguably potentially better.”

Altogether, the U.S. Treasury Department has invested $82 billion to restructure GM and Chrysler. Investment banks Morgan Stanley and J.P. Morgan will price the first 365 million GM shares sometime Wednesday and the shares will trade Thursday on the New York Stock Exchange.

Read more: http://www.freep.com/article/20101115/BUSINESS01/101115046/Rattner-Taxpayers--loss-from-auto-bailouts-likely-to-be-less-than-10B#ixzz15OfKYrmj

[MrTriumph]

1. The Detroit Free Press spins this like it is good news.

x

[Cirque du So-What]

2. I consider it good news

$10B is chump change compared to the economic & societal costs that would have resulted from the US automaking industry going down the toilet.

[stuart68]

4. The number is crap

It is actually much larger.

Plus, the economic and societal cost argument is a red-herring.

[stuart68]

3. Now that is funny ! What BS.

This ignores the $45B in taxes GM dodged.

[DallasNE]

6. This Doesn't Pass The Smell Test

Do you have a credible link?

[stuart68]

7. What smell test ? That a big corporate donor gets a sweet deal ?

http://www.huffingtonpost.com/2010/11/03/gm-tax-break-could-be-wor_n_778300.html

[Kolesar]

10. You would rather have another million people unemployed...eom

[stuart68]

11. Yet another red-herring...

What million people would be out of work. If GM went out of business tomorrow morning, do you think people would stop buying cars from american manufacturers ? That is the logic to your argument, ie, the plant shuts down, the feeder plant shuts down and the diner selling lunch shuts down.

Wrong. People would still buy as many cars, so someone would have to make them, and feed those workers.

More excuses to justify corporate innefficiency.

[mbperrin]

23. Why do you think suppliers try so hard to put competitors out?

Because reduced supply and unchanged demand mean higher prices for the survivors.

NOT more output from the survivors.
NOT more hiring from the survivors.

The whole point is to make more by doing less. That's what business calls efficiency, and the rest of us call price-fixing and predatory capitalism.

Please give a solid example of one industry where a major business went out of business and all of their employees were hired by their former competitors. That's your statement and your burden to prove. Link, please.

[stuart68]

26. Uh, the auto industry

Try Saturn and the new Tesla facilities...

These are fixed assets. Have you ever been in a supply or assembly plant ? You simply cannot make 80 cars an hour if the line is configured for 60. When I was in MI in the 80s, Buick City was running standard 60 hour weeks. A vote was taken to rehire an entire shift and go to 2 standard shifts. The union membership at the time voted it down, leaving several thousand people on the street. Those plant are gone now.

The reason the suppliers want to kill off competition is to be single source. The auto makers come to them every year to extract concessions on cost. Period. End of story. Cut your cost or you are gone.

Ther are simply not 1,000,000 expendable positions out ther that would have been absorbed by turning up the crank at all the other plants. It is not physically possible. Those positions would have ended up elsewhere.

[mbperrin]

33. Your post indicates that unemployment results when plants are closed.

Exactly my point. Thank you.

[stuart68]

36. Not a million people, however.

[Romulox]

38. Your argument that no jobs would be lost appears to be the more hyperbolic of the two,

all things considered. Plus your bizarre, home-spun economic pronouncements fly in the face of observable reality. So there's that... :hi:

[stuart68]

40. What observable reality ?

My favorite Lincoln quote goes something like, "if you call a tail a leg, how many legs does a dog have ? Four. Calling it a leg doesn't make it a leg."

The only observable events are the cry that the sky will fall if we do not buy a failed business. I wish I could find the link, but I saw a pundit say this is critical that we GM to save all these jobs, but "no one wants their cars" which elicited the response "why would we ever buy the company"

The bailout just kicks the can down the road a little farther - the same strategy that got GM into trouble in the first place.

As far as saving jobs, I assume you wouldmhave advocated for rescuing the wagon and buggy whip folks as well.

[KossackRealityCheck]

28. "stop buying cars from american manufacturers?" Yes, they would

It's called market share. If GM had shut down, even temporarily, other companies would have taken their market share, and in the current environment, the companies that would have taken their share would be foreign companies, especially Japanese.

That would be share never to return to American workers.

[stuart68]

30. And where are those cars built, by whom

Would they be built in the US like they are right now ?

[Turbineguy]

5. That's the commish to the investment banks.

[Kip Humphrey]

8. The govt made that back in tax receipts from the jobs saved by the auto bailout. /nt

[stuart68]

12. Those workers paid extra taxes when they kept their jobs ?

[onethatcares]

9. why the hell should we take any losses?

amortorize the payback, if it takes 25 years, so be it. but no fucking way should we be in the business of just taking losses so soft handed white boys in suits can live the good life (yeah,I know, Lose the white boy thing, but no they're leeches and should be treated as such.)

[sam sarrha]

13. hey.... thats only like a Month what it costs in Iraq.. it was a great Deal saving our strategic

industries..

[defendandprotect]

14. And we should be grateful .... that we "rescued" a failing industry and only lost 10B ... ???

And how much did Morgan Stanley and J. P. Morgan get in this scam?

[stuart68]

15. Only $10B ? What all the fuss

Many companies on the brink have lost more and come back. If it is such a good deal, why did we have to take the company over ? Something smells funny.

[defendandprotect]

16. Capitalism smells funny ..... !!! Love J. P. Morgan being involved in this -- !!!

:)

[stuart68]

17. None of that loss disappeared - someone's pockets got lined.

[Omaha Steve]

18. Stock & bondholders lost a bunch too

Workers took huge pay cuts while Wall St. handed out even larger bonuses. I'm glad we didn't loose another million jobs by the time you add in suppliers to GM & Chrysler.

OS

[stuart68]

19. why are people so quick to believe the "million jobs" story

If the grocery store in my neighborhood went out of business, would people stop eating or buy groceries elsewhere ? There is even a better argument that the grocery store loss would cost more jobs than the loss of GM. Those GM suppliers would make parts for the company who fills the gap of lost production.

The story of a million lost jobs just makes no sense especially if you understand auto manufacturers - the supply chain would never support all the vehicles coming from overseas, the workers in an existing plant cannot just work faster to make up the gap, and consumers will still buy just as many cars. In other words, the production and therefore the jobs would have simply shifted to a more effective company in the US.

But now we have a government subsidized car company that is producing an electric vehicle that no one can afford without gov't subsidies, that, by the way, is not even an electric car - it is a hybrid.

this is a lot of meddling by people who have no idea what they are doing and are being taken to the cleaners by a few execs (who are back in their corporate jets, by the way).

It all stinks...

[Kolesar]

20. Because it was written in dozens of business magazine articles

Because Wesley Clark wrote an op ed to that effect. Because my senator said so in speeches and press releases.

[stuart68]

22. Please share some factual information.

Gen'l Clarke is an Auto/economic expert ??

Your senator said so ???

Did they mention where all the prevailing demand for vehicles no longer produced by GM would go, or did they just forget that point ?

[Omaha Steve]

21. There are 6 companies with 200 miles of my home that do not make parts for non big 3

Do you think non-union car makers would do business with the 3 union suppliers in my area? They haven't up to now. Seats, gears, etc.

Why do you so quickly believe it isn't a million jobs total?

I also don't want some of the last US manufacturing companies to fold up the tent. We need American companies to build things here to keep profits here.

[stuart68]

24. Which big three ? Is Toyota one ?

Those facilities do business where they do as a result of multiple-year contracts (called programs). Non union auto companies do business with union suppliers all the time.

Yes, we need to make it here, but propping up a failure like GM is the way to ensure failure, not success.

[Romulox]

27. Your argument is ridiculous. South Korea and Japan would swoop in, leaving AMERICANS out of work

:hi:

[stuart68]

29. Really. And how would they do that?

Produce cars out of thin air ? How many Japanese cars are built in the US - do you know ?

[Romulox]

32. They would put lots of *finished assemblies* (e.g. engines, transmissions) on big container ships

to be assembled by low-wage rubes in Mississibama and other low education/low worker rights states.

[stuart68]

35. ok, so it is not about saving jobs

it is about saving them where you want them.

also, most assembly facilities run with 4 to 8 hours of inventory on-hand for those type of assemblies. containers take 8 weeks across the water, let alone the inbound container inspection, meaning assembly facilities would have to have something like 80X the normal inventory - not likely to happen in an industry focused on lean processes.

In other words - those who are not familiar with the industry succumb to the red-herring argument of a million lost jobs.

[Romulox]

37. So...imported cars (or parts) are no threat to the American worker...

because container ships take too long? What a powerful argument! :silly:

[stuart68]

41. Stay with me now

I didn't say cars are a threat. You said finished assemblies, ie, engines. You are mistaken there.

As for cars, we will not compete with cars like the Volt, that are not all electric as advertised, and require huge government subsidies. It is just a very expensive Prius, which has been around forever. If that is the basis of our New Competitive GM, we're hosed.

[Romulox]

43. "the domestic content of all Toyota vehicles sold in the United States...is 48 percent"

One thing this board has taught me: there is no use pursuing discussions with posters who demand you disprove their groundless assertions, such as those you have made on this thread. You arguments are baseless.

"the domestic content of all Toyota vehicles sold in the United States -- including imported models -- is 48 percent"

http://www.boston.com/cars/news/articles/2006/09/24/made_in_america_hard_to_tell/

[stuart68]

47. Nice non sequitur

You say engines will come from overseas, and I disprove it with the facts of auto assembly.

To which you respond that foreign cars are a threat, to which I agree (not sure your issue there).

Then you post an article that makes my original point. Yes, while it states that only 48% of the content of all Toyotas is domestic content, it also states that only 73% of GM and Ford (72 for Chrysler) are domestic content. Only 73%. Is that good ? The Toyota content is impacted by their in Asian manufacturing, what is GM's excuse ?

"Detroit's latest muscle cars, the 2010 Ford Mustang and Chevy Camaro, have a middling 60 percent domestic content, while their crosstown rival, the Dodge Challenger, comes in at 56 percent. Of the three, the Mustang is the only car built here; the Challenger and Camaro are assembled in Canada."
http://www.cars.com/go/advice/Story.jsp?section=top&subject=ami&story=amMade0709

In 2009 (your article is 2006), of the top 11 vehicles ranked by percentage of domestic content, 5 are foreign brands.

The original argument of foreign car companies taking over at the expense of domestic parts manufacturing and assembly just does not hold water when you look at these numbers.

[Romulox]

52. Another illogical post. If importing car parts is so difficult (as you have asserted)

where does the NON-DOMESTIC content of these vehicles come from? :silly:

[stuart68]

51. So, let me ask you this...

Let's assume you are correct, and GM going bankrupt would result in the foreign car makers immediately picking up the demand:
If the demand can be redirected so quickly
And if we own the largest stake of GM
And if (someone posted earlier) the auto companies pick and choose who they use as suppliers

Why, as majority stakeholder would we simply not mandate 100% domestic content in the vehicles and as opposed to simply saving 1.4M jobs, add yet another 500k solid union jobs (75% US content = 1.4M, then an additional 25% is 1/3 more or 420k jobs).

If they could have been taken elsewhere so quickly, why couldn't we take them over ?

Answer, we can't because those jobs would not have disappeared in the first place.

[Romulox]

53. The economics of building motor vehicles is a bit more complicated than you cockamamie 101 level

economics models.

"Why, as majority stakeholder would we simply not mandate 100% domestic content in the vehicles and as opposed to simply saving 1.4M jobs, add yet another 500k solid union jobs (75% US content = 1.4M, then an additional 25% is 1/3 more or 420k jobs)."

There is an existing manufacturing infrastructure centering around automobile production in this country. The purpose of "bailing out" the automakers was to save this infrastructure. While I personally would have loved to see an increase in US manufacturing as a consequence of government bailouts, such a goal conflicts with this administrations neoliberal ideology. So it's not a good argument to suggest that the actions of another party (the Obama administration, in this case,) are not consistent with my ideas or ideology without first making some kind of connection between my position and that of the Obama admins. You'll remember that the Obama administration also fought against "buy American" provisions in the stimulus.

"If they could have been taken elsewhere so quickly, why couldn't we take them over ?"

I hate indeterminate pronouns, as they are often a smokescreen for sloppy thinking. Who is they and who is taking what, where? If your question is if there is excess automotive manufacturing capacity in the world, and if imports from Asia and elsewhere could fill the gap left by a collapsed US auto industry, then the answer is absolutely.

"Answer, we can't because those jobs would not have disappeared in the first place."

Almost a quarter of those jobs HAVE disappeared in only the last 10 years. Your arguments simply don't match up to reality. :hi:

[stuart68]

54. Again, stay with me...

Despite the disparaging comment, I will try again.

Non sequitur - "almost a quarter of those jobs have disappeared..."
I thought you said we saved them. How could we have lost them already ?

Let's leave it at that and get you to focus on one thought at a time.

[Romulox]

55. More tripe.

"I thought you said we saved them. How could we have lost them already?"

Jobs have been lost in the US manufacturing sector over the last decade due to increased competition from overseas manufacturers (and indeed, from US companies manufacturing abroad.) This fact has been brought to your attention to falsify your rather whimsical notion that an additional loss of jobs in that sector would not be likely under a scenario in which the US auto industry were allowed to collapse.

In any event, your speculation has no bearing on reality; both the auto sector and the financial sector were bailed out, making a one-tracked supposition about what would've happened if only the auto industry (but not the financial industry) were left to its fate pointless. Also, do you remember the bailouts of the airline industry (probably not). You'll need to fit the collapse of ALL of those industries in your Rayndian opus, if you want to posit what a true capitalist utopia might look like. :hi:

[Romulox]

25. It's so interesting how TRILLIONS to Wall Street elicit a blank stare

but a few billion to Detroit get the froth going among the hoi palloi. I don't defend the Obama administration's handling of this boondoggle, but the visceral reaction of people on this board and elsewhere to a comparatively minuscule amount speaks to an attitude in which people feel it is "only natural" for New York bankers to live off the public dole, but it is a sheer outrage for working people in Detroit to receive assistance.

[chill_wind]

34. +1000

[mbperrin]

42. Yep, wild, isn't it?

Those welfare kind-bankers are entitled, but blue collar workers??? Not a chance.

People in this country have been voting against their best interest for decades now. It's got to be some kind of illness.

[KansDem]

31. Just in time for China to buy a stake in GM!

China Wants to Buy a Stake in GM

China’s largest automaker, SAIC Motor, is planning to buy a 1% stake in General Motors for $500 million in this week’s initial public offering. Foreign investors, like China, appear set to take a 4% interest in the carmaker when it goes ahead with its planned sale of $10 billion of common stock and $3 billion of preferred. Uncle Sam, after a controversial $50 billion rescue, holds 61% of GM’s shares.

Washington, as a practical matter, could use Beijing’s money to pull off such a large offering. But should China be allowed to buy part of the American icon? There are reasons to say “yes.”

China, after all, will be essential to GM’s future. This year, for the first time ever, the American company will sell more vehicles in China than in the United States. It holds the No. 1 spot there, selling Buicks, Chevys and Cadillacs in the world’s largest—and fastest growing—auto market. And SAIC is no stranger to GM. It is the American carmaker’s partner in both China and India. The Chinese company is looking for a technology-sharing arrangement, and has obvious ambitions to grow outside China. GM is SAIC’s logical choice as global partner.

In any event, it’s hard to get worked up over China taking a single-digit stake in General Motors. There are even some Americans who would say, if the Chinese wanted all the shares of the ailing carmaker, they could take them. Better them than us.

--more--
Forbes

[Safetykitten]

39. We will make money from this. This is excellent news.

[Lance_Boyle]

44. We who? How do 'we' make money from a loss of ~$10,000,000,000? n/t

[stuart68]

49. It is simple, we don't.

[Bozita]

45. Related article - "Auto bailout saved more than 1.4 million jobs"

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x4618766

[stuart68]

48. I'm sure an Ann Arbor firm is unbiased...

I'd love to see the study, but i cannot seem to find the details. Just many many articles referring to the same industry advocate proclaiming the success of a the bailout.

[hughee99]

46. Clearly, this article is mistaken, as I was informed some time ago, this was a LOAN

not a bailout, and LOANS get repaid when companies are profitable.

"It is a L-O-A-N not a bailout do we understand that. No OK, let me give you the definition.

LOAN

–noun 1. the act of lending; a grant of the temporary use of something: the loan of a book.
2. something lent or furnished on condition of being returned, esp. a sum of money lent at interest: a $1000 loan at 10 percent interest.

The auto industry is asking for a loan, not a bailout."

http://upload.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4501516

http://crooksandliars.com/karoli/congratulations-gm-all-tarp-funds-repaid-5

[stuart68]

50. Unfortunately, the loans were repaid with a bailout slush fund

GM repaid the loans with other bailout money, resulting in their ability to lower the finance rate. When Whitacre said he repaid the loans early, he commits the sin of omission - he just forgot to tell the "rest of the story".