|WHAT A LOSER YOU ARE: |
you and yo daddy obama:
Despite GM's profits, taxpayers probably won't be off the hook
Shikha Dalmia at Reason Magazine has some bad news for taxpayers expecting GM to pay back the $30 billion they owe:
Three years after being rescued by a taxpayer bailout, General Motors recently announced some rather ambitious profit targets for 2012. But even if it meets these targets-a big if-taxpayers should not wait on one foot to recover their remaining "investment" in the company.
There is no doubt that GM has returned from the brink. It made $8 billion last year, a record high, and regained enough global market share to once again become the world's biggest automaker, a title it had lost to Toyota. More impressive, it is planning to bump its profit margins from 6 percent last year to 10 percent this year, on par with its best-in-class rivals such as Hyundai and BMW. This, it hopes, will allow it to post $10 billion in profits this year, something that only 17 public companies managed to do in 2010.
How did investors react to all this hope and cheer? With a giant yawn: GM's stock price, which has been hovering around $25 for months, barely budged. That's $8 below GM's IPO price. And it's $30 below what's needed for taxpayers to recover the $30 billion they still have stuck in the company.
If investors aren't buying GM's rosy scenarios, it's for some good reasons. Peter De Lorenzo, editor of Auto Extremist, notes that GM is facing the most competitive market in history and investors are dubious that it can deliver. GM's $8 billion in profits last year resulted partly from the tsunami in Japa that disrupted Toyota and Honda's global supply chain.
Both are back this year and more formidable than ever. While GM reported a 6 percent drop in January sales in North America from a year earlier, its foreign competitors posted impressive gains. GM will have a hard time matching last year's performance, let alone upping it if it has even one more month like January, De Lorenzo notes.
As long as GM's stock price is hovering around $25 a share, they will owe the American people between $20-$30 billion. And then there's the question of what to do with all that extra cash:
For example, McAlinden notes, the administration gave GM about $10 billion more than was strictly necessary to finance its bankruptcy. The money contributed to GM's nice $33 billion cash cushion right now. GM could use this money to buy its own stock and bid up prices, mitigating taxpayer losses-or pay dividends. But McAlinden doesn't believe that's what GM will do. It could use the money to pay off its obligations to the union health-care trust fund, making this a direct infusion of cash from taxpayers to unions.
American auto companies don't exist to make cars; they are in business to fund massive union health and pension funds. An exaggeration? Perhaps. But for Obama to be bragging about bringing the auto industry back from the dead is also an exaggeration and dishonest politics.
GM's first priority should be to pay that cash back. And the best way to do that is to make the business of manufacturing and selling good products that people want to buy their number one priority.