Government Motors Tax Bill

[gatordowneast]

Not only did we bail Government Motors, their pension funds, unions and more out, at the expense of bondholders, vendors and others but we also will be receiving no corporate income taxes for many years. You will need to click to page two to find the story (buried as are most articles not favorable to the administration)

http://finance.yahoo.com/news/companies-paying-the-least-in-taxes-180305270.html?page=2

[HudsonGator]

This country would not be better off if GM had been allowed to fail.

[G8trGr8t]

This country would not be better off if GM had been allowed to fail.

But we would be much better off with a structured reorganization. It wouldn't have failed it would have been restructured and the unions would have had to share in the pain

[scrappygator]

+1

[northgagator]

This country would not be better off if GM had been allowed to fail.


But we would be much better off with a structured reorganization. It wouldn't have failed it would have been restructured and the unions would have had to share in the pain

Both post are very good and at the same time right..

Darwinism is not just for animals and plants. It is also very active in the business world:
. The only constant is change. You must adapt. You must cannibalize your own products. Steve Jobs said this. His rationale was that if you don’t cannibalize your own products your competitors will.

Your core ‘why’ may never change but you’re probably going to change everything else about your product/service offering. Why wait till the market forces you to change? Why not lead change?

Plan to innovate. Plan to get feedback on your innovation. Plan to measure what works and be willing to change the plan based on the feedback you receive.

The organizations that thrive in 2013 and beyond will have a determination to adapt. A willingness to change for the better. They will take calculated risks and understand that the riskiest place to be is standing still avoiding change.

http://strategylab.ca/darwinism-of-business-strategy/

Here us a good read that supports the two posts
http://www.briansolis.com/2013/02/no-business-is-too-big-to-fail-or-too-small-to-succeed-sobering-stats-on-business-failures/

[surfn1080]

GM would not of just fell apart. It would of gone through a re-structure and probably would of been better off than it is today.

[oragator1]

GM didn't even have money to make payroll or pay suppliers at the height of the credit crunch. In 2003, 2004 etc yes restructuring would have been the best option, but in 2008 or 2009, where were emergency funds going to come from? It was 10's of billions they needed and the big houses were illiquid, bankruptcy wasn't an option if they were going to continue operating. It's why Bush and then Obama both felt the need to take that path, and it wasn't all political. Had they gone all of the suppliers would have gone, then those who supply the raw materials to the suppliers etc etc. It was millions of jobs that were potentially affected, there were really only 2 choices, let them go or bail them out.

[G8trGr8t]

Buffett would have bought it just like he did AIG and Bank of America. Gubmnt could have backstopped him while he cleaned up the debt and the outlandish union benefits and work rules. He would have made a ton of money on it and cleaned up their books. Right now, I would not bet that GM is back with their hands out in a number of years.

And oh yeah, if the Chinese could not steal the technology we paid for with the volt remotely, they just convinced/blackmailed GM to move their electric car headquarters to China so the hacking and spying would be even easier.

[QGator2414]

This country would not be better off if GM had been allowed to fail.

This country would be better off if GM had restructured under the law.

[G8trGr8t]

GM didn't even have money to make payroll or pay suppliers at the height of the credit crunch. In 2003, 2004 etc yes restructuring would have been the best option, but in 2008 or 2009, where were emergency funds going to come from? It was 10's of billions they needed and the big houses were illiquid, bankruptcy wasn't an option if they were going to continue operating. It's why Bush and then Obama both felt the need to take that path, and it wasn't all political. Had they gone all of the suppliers would have gone, then those who supply the raw materials to the suppliers etc etc. It was millions of jobs that were potentially affected, there were really only 2 choices, let them go or bail them out.

then why did the unions come out whole and the stockholders like me come out with zilch...yeah, nothing partisan or political at play there

[geauxgator1]

then why did the unions come out whole and the stockholders like me come out with zilch...yeah, nothing partisan or political at play there

The unions now are the owners of the company. More money for the DNC.

[MichiGator2002]

Can anyone explain how the fate of the company and the entire body politic hinged on completely screwing GM's secured bondholders by ignoring the law altogether? The only people that the GM bailout was designed to protect was the UAW, and the government stepped over a lot of grandparents' retirements that were in s lot of that low risk (heh) mutuals that held a lot of those secured bonds that got ripped up to prop up the UAW deal that represented almost all of GM's problems. Like cutting off the patient to save their gangrenous limb.

[oragator1]

Buffett would have bought it just like he did AIG and Bank of America. Gubmnt could have backstopped him while he cleaned up the debt and the outlandish union benefits and work rules. He would have made a ton of money on it and cleaned up their books. Right now, I would not bet that GM is back with their hands out in a number of years.

And oh yeah, if the Chinese could not steal the technology we paid for with the volt remotely, they just convinced/blackmailed GM to move their electric car headquarters to China so the hacking and spying would be even easier.

Buffett had his worst year on record in 2008, he wasn't rolling in cash then either. At the end of 2008 he had 25 billion cash on hand, the total cost of the bailout was around 50 billion. So even if he got it done at half price it would have meant using up every dollar of available cash he had, and anything more than half price he was probably priced out. Making a bet on one of the most dysfunctional companies in the country, or selling assets in the worst market in living memory to make the purchase of said dysfunctional company, neither were probably appealing options to him.
I would be willing to bet that Paulson at least gauged his interest in GM before bailing them out, the fact that he couldn't find an investor(Buffett or otherwise) and had to do the bridge loan further makes the point that options were extraordinarily limited.

[mastoidbone]

It was a terrible deal for the people fo America.

All the sales GM has would now be had by corporations who actually PAY taxes---this will cost the US over 50 BILLION in long term on top of the BILLIONS we have lost on GM bailout already.

If GM was to be bailed out----this should NOT have been included----this was MOSTLY about dems paying back unions to the detriment of americans and bond holders and rule of law.

It was alos illegal according to the right wing extremist site---harvard.

http://www.law.harvard.edu/programs/olin_center/papers/pdf/Ramseyer_et%20al_690.pdf

[G8trGr8t]

It was a terrible deal for the people fo America.

All the sales GM has would now be had by corporations who actually PAY taxes---this will cost the US over 50 BILLION in long term on top of the BILLIONS we have lost on GM bailout already.

If GM was to be bailed out----this should NOT have been included----this was MOSTLY about dems paying back unions to the detriment of americans and bond holders and rule of law.

It was alos illegal according to the right wing extremist site---harvard.

http://www.law.harvard.edu/programs/olin_center/papers/pdf/Ramseyer_et%20al_690.pdf



no no no...this would have destroyed america if the unions would have had to sacrifice..listen to oragator he knows

[oragator1]

no no no...this would have destroyed america if the unions would have had to sacrifice..listen to oragator he knows

Snide comment aside,

Nowhere have I said that the terms of the bailout were advantageous to the American public or that the unions didn't get a better deal than they should have, I agree with mastoid on that point, more pain should have been felt within the company and the long term tax breaks were also politically motivated, a back door attempt to make the bailout look better.
The only point I am making is that in the context of the economic reality in the fall of 2008 bankruptcy was not an option, and 2 presidents from diametrically opposed political philosophies both realized it. The revisionist history that has taken place around what the viable options were at the time is ideologically motivated.

[G8trGr8t]

apologies for the snide comment but GM is the only stock in my portfolio at the time that did not recover due to their bankruptcy and the swetheart deal that the unions got is a real source or irritation for me. I am not rich or from a wealthy family but am trying to build a retirment nest egg through hard work and savings. I worked hard and saved and invested in a blue chip american company that had assets to back up the stock even if the stock went south it should not have ever went to 0. I understand and accept risk but I don't understand or accept theft. O stole close $10k from me with no basis in law and gave it to the unions.

there was no interest in taking over Chrylser either until the unions agreed to concessions. if the unions at GM would not have had 0 backing them up, they would have been more reasonable in their discussions with possible suitors and the company would have found private funding but the legacy union costs and existing contracts would have taken a beating as they should of.

There is absolutely 0 doubt in my mind that the GM bailout was a gift to the unions; a gift taken out of my pocket illegally by the POTUS.

[mastoidbone]

Why was the union--which had claims to about 10-15% of value get much more then bond holders with larger claims and with equal standing by law to those claims?

Every car gm sells costs the USA money--no tax paid by gm---
The bailout costs will be felt for over a decade in reduced govt revenue.

There was no benefit to the bailout in long term and a giant cost.

Does anyone really think that all the cars now sold by gm would not be replaced by ford? Toyota? Nissan? And they would pay taxes!

There was and remains a massive over capacity in car manufacturing---why bail out a company in an industry with massive over capacity and reward the worst car maker of the bunch with billions of OUR cash? And then allow them to avoid almost 50 billion of taxes that could cover cost of sequestration for example?

This was a hand out to unions and a reward for a corporation that made awful cars and had awful managers and engineers.

[gatordowneast]

The unions now are the owners of the company. More money for the DNC.

You got it. We get hosed again.

[HudsonGator]

So many words in this thread, yet so little truth.

Here's a little knowledge for the ignorant, it wasn’t some evil spell from the Obama Administration that just happened, rather it was indeed a good old fashioned Chapter 11 reorganization. It was filed as In re General Motors Corp, bearing case number 09-50026, in the United States Bankruptcy Court, Southern District of New York.. The UAW, through its health care trust, got a minority ownership interest (17.5%) in the new GM because it was one of the largest creditors of the old GM. Unsecured creditors also got a minority ownership interest (10%). The U.S. and Canadian governments received ownership interests in the new GM because they put up the money (60.8% and 11.7%, respectively).

This was a legal bankruptcy. The only thing that made it unique was its sheer size and the fact that two governments stepped up and provided the cash to save the company.

[T3goalie]

So many words in this thread, yet so little truth.

Here's a little knowledge for the ignorant, it wasn’t some evil spell from the Obama Administration that just happened, rather it was indeed a good old fashioned Chapter 11 reorganization. It was filed as In re General Motors Corp, bearing case number 09-50026, in the United States Bankruptcy Court, Southern District of New York.. The UAW, through its health care trust, got a minority ownership interest (17.5%) in the new GM because it was one of the largest creditors of the old GM. Unsecured creditors also got a minority ownership interest (10%). The U.S. and Canadian governments received ownership interests in the new GM because they put up the money (60.8% and 11.7%, respectively).

This was a legal bankruptcy. The only thing that made it unique was its sheer size and the fact that two governments stepped up and provided the cash to save the company.


Try to sell that BS to the bond holders...:lie::lie::lie:

[QGator2414]

So many words in this thread, yet so little truth.

Here's a little knowledge for the ignorant, it wasn’t some evil spell from the Obama Administration that just happened, rather it was indeed a good old fashioned Chapter 11 reorganization. It was filed as In re General Motors Corp, bearing case number 09-50026, in the United States Bankruptcy Court, Southern District of New York.. The UAW, through its health care trust, got a minority ownership interest (17.5%) in the new GM because it was one of the largest creditors of the old GM. Unsecured creditors also got a minority ownership interest (10%). The U.S. and Canadian governments received ownership interests in the new GM because they put up the money (60.8% and 11.7%, respectively).

This was a legal bankruptcy. The only thing that made it unique was its sheer size and the fact that two governments stepped up and provided the cash to save the company.

:huh:

[QGator2414]

Try to sell that BS to the bond holders...:lie::lie::lie:

The bond holders are just "ignorant". They are suppose to know a legal bankruptcy screws them like hudson...

[G8trGr8t]

Harvard Law Professor didn't see it as legal

http://www.law.harvard.edu/programs/olin_center/papers/pdf/Ramseyer_et%20al_690.pdf

and far from being normal, it changed the rules of bankruptcy totally and is under review by a canadian judge considering revoking it due to deception before his ruling. unions would never have been in front of or equal to secured bond holders under the rules of bankruptcy that have been practiced since this country created it's own laws. they only agreed to their status after 0 threatend to withhold any and all gubmtn support if they did not allow the unions to move into first position. once again, 0 governs through crisis, threats, and intimidation. proud member of the chicago gangsters parading as the democratic machine.is it any wonder every governor in recent memory from Illinois has ended up in jail?

http://www.americanthinker.com/2012/12/slouching_toward_damascus.html


Another surprise to me this week involves the GM bailout, which turned American property law on its head to pay off the UAW, but may well be reversed. Judge Robert Gerber believes that when he approved the sale agreement he was not informed of a "lock-up agreement" by which, on the eve of entering bankruptcy, the company spun off its liabilities to "old GM" , used the multi-billion dollar bailout to create a new company which now had assets and no liabilities. The suit was brought by the "old GM" trustees against the hedge funds at the heart of the agreement.

Accounts of the hearing indicate Judge Gerber was not happy with the secret deal

He has expressed deep frustration with the company for failing to disclose the deal, leading some to speculate that he may overturn one of President Barack Obama's signature achievements.

"When I approved the sale agreement and entered the sale approval order I mistakenly thought that I was merely saving GM, the supply chain, and about a million jobs. It never once occurred to me, and nobody bothered to disclose, that amongst all of the assigned contracts was this lock-up agreement, if indeed it was assigned at all," Gerber said in July.

"The judge has made it very clear that he is greatly dissatisfied with the process," one analyst told the Washington Free Beacon in October. "He's basically implying that GM hid it from him and that reopening the sale is a possibility."

If Gerber takes that course the company could be forced to return the $30 billion taxpayer bailout that it received through the course of bankruptcy, on top of the new liabilities.

"The Treasury Department, which oversaw the auto bailout, did not return emails for comment.

The company is taking the possibility of a negative ruling from Gerber very seriously. GM attorneys filed court documents saying that the lawsuit "could create a chaotic situation for GM Canada, spawn new litigation in other forums, and potentially provide a windfall to the noteholders."

The bankruptcy expert said if the two sides cannot come to an agreement on Thursday, Gerber could preside over one of the most historic rulings in bankruptcy court history."This has tremendous implications for future of American business and bankruptcy precedent," he said. "It means more than just GM -- this is the rule of law and how creditors are treated in the United States legal system."




and even the GM CEO says it wasn't well done

http://nlpc.org/stories/2012/06/12/akerson-admits-gm-bankruptcy-not-well-thought-out


General Motors CEO, Dan Akerson, discussed some of the issues plaguing GM's share price in today's Wall Street Journal. Akerson laments a bloated bureaucracy at Government Motors that has not greatly improved since the company's 2009 bankruptcy process. Despite admitting that the bankruptcy was rushed through without proper planning, the Obama-appointed Akerson did not mention the continued UAW overhangs at the company.

Regarding an inherited bloated management structure at GM and the inefficiencies that went along with it, Akerson stated, "The good thing about our bankruptcy is that it took only 39 days. The bad news is that bankruptcy took only 39 days. If we had been there longer, people would have asked these questions and looked at these things."

As a result of the Obama Administration being able to protect UAW interests in a rushed-through bankruptcy process, many of the underlying problems at GM were not addressed. Akerson points to European problems and bloated management, but journalists neglect to question him on the $25 billion under-funded pension obligations along with an even more neglected additional $6.8 billion in other post-retirement liabilities. The idea that GM is so financially sound that they could buy back government's 32% taxpayer-funded stake in GM has been touted by multiple media sources. The balance sheet, and now the seeming words of caution from Akerson, belies the claims of "fortress-like" financial strength at the company.

I have stated in the past that the Obama Auto Task Force which orchestrated the GM bankruptcy process relied on bankruptcy experts instead of auto industry experts when they restructured GM. Labor costs and pension liabilities were overlooked as the politically powerful UAW had its interests protected. The belief that an influx of $50 billion of taxpayer money and the removal of $28 billion of bondholder debt could permanently fix GM's problems was a major miscalculation. The simplistic view that closing dealerships would greatly lower GM operating costs was also not accurate. Those realities are now coming to light as GM has about the lowest profit margins in the industry, despite all of the taxpayer help.

The Obama Administration did have an opportunity to slow down and think things out during the 363 bankruptcy process. When my group that represented individual GM bondholders requested that the process be slowed down, the Task Force threatened to pull out and allow a total liquidation of GM. GM now has to live with the government's decision to ignore operational weaknesses at the company while striving to ensure that the UAW was not adversely affected.

It appears that Akerson's comments and actions continue to be largely politically-driven. He praises the Obama Administration for not participating in board meetings, but neglects the fact that many of the board members are Obama appointees. The denial that pension obligations and labor costs put GM at a competitive disadvantage is also cause for GM shareholders to be concerned. An illogical and costly focus on the Chevy Volt, which loses money for shareholders but supports Obama green initiatives, increases the likelihood that Akerson is motivated by politics rather than profits.


this was not a normal bankruptcy and moving the union to the front of the line went against over 200 years of bankruptcy law. keeping the unions contracts and pensions have saddled GM with responsibilities and debt that will still probably drive it back into bankruptcy again as it continues to strive to earn money while the rest of the industry is thriving.

[HudsonGator]

That's why there are courts of law. There is pending litigation on this issue as we speak.

Time will tell.

[QGator2414]

That's why there are courts of law. There is pending litigation on this issue as we speak.

Time will tell.

:roll:

As said before tell that to the bondholders...

[mastoidbone]

Why did unions get 17.5 % of the company when their claim was FAR less then 17.5%? The unions are as unsecured as bond holders---yet got FAR more of the company even though their claim was FAR smaller?

GM owed unions 20 billion for health care---they got 17.5% of company for that plus 10 billion cash.
Bond holders were owed 27 billion---they got 10% of company.

That violates the law.
There is NO legal basis for treating unions better then bond holders ---but there is a political reason for doing so.

[HudsonGator]

Why did unions get 17.5 % of the company when their claim was FAR less then 17.5%? The unions are as unsecured as bond holders---yet got FAR more of the company even though their claim was FAR smaller?


I wasn't at the table when this deal was being negotiated, but I suspect the UAW had to be brought on board, because if the workers didn't keep working, there wouldn't be a company to save.

And btw, the UAW did make significant concessions in wages and work conditions as part of this deal.

[MichiGator2002]

So many words in this thread, yet so little truth.

Here's a little knowledge for the ignorant, it wasn’t some evil spell from the Obama Administration that just happened, rather it was indeed a good old fashioned Chapter 11 reorganization. It was filed as In re General Motors Corp, bearing case number 09-50026, in the United States Bankruptcy Court, Southern District of New York.. The UAW, through its health care trust, got a minority ownership interest (17.5%) in the new GM because it was one of the largest creditors of the old GM. Unsecured creditors also got a minority ownership interest (10%). The U.S. and Canadian governments received ownership interests in the new GM because they put up the money (60.8% and 11.7%, respectively).

This was a legal bankruptcy. The only thing that made it unique was its sheer size and the fact that two governments stepped up and provided the cash to save the company.

Secured bondholders get paid first and in full in real, legal bankruptcy. Billions in losses don't get carried over as if they didn't exist in real, legal bankruptcy. This was kabuki, bankruptcy cosplay designed to make it look legit without doing what every real bankruptcy proceeding would have had to do -- tear up UAW's contract.

[mastoidbone]

I don't care what concessions they made.
If bond holders were owed 27 billion and they got 10% of company why did unions get 17.5 plus cash for a 20 billion claim?

[HudsonGator]

Secured bondholders get paid first and in full in real, legal bankruptcy. Billions in losses don't get carried over as if they didn't exist in real, legal bankruptcy. This was kabuki, bankruptcy cosplay designed to make it look legit without doing what every real bankruptcy proceeding would have had to do -- tear up UAW's contract.


We'll see if that allegation is proven in court in the pending litigation.

[mastoidbone]

http://www.nypost.com/p/news/opinion/opedcolumnists/model_corruption_ttyHIpNuoQRwVTkBZuhHeM

For similar claims unions got 3-4 more value then bond holders---even though they had EQUAL stature in terms of priority---both unsecured.

Yet govt forced a deal favoring unions?
Why? What law? What politics?

[MichiGator2002]

We'll see if that allegation is proven in court in the pending litigation.

Honestly, GM's bankruptcy's radical departure from the norm wouldn't be an unreasonable thing for a judge to take judicial notice of. Secured bondholders getting the figurative "shocker" is not what would have happened in any Chapter 11 reorg that wasn't being carefully scripted to protect Obama's contributers, whose contract being voided would have been almost the entire beneficial point of a reorganization instead of a liquidation.

[oragator1]

apologies for the snide comment but GM is the only stock in my portfolio at the time that did not recover due to their bankruptcy and the swetheart deal that the unions got is a real source or irritation for me. I am not rich or from a wealthy family but am trying to build a retirment nest egg through hard work and savings. I worked hard and saved and invested in a blue chip american company that had assets to back up the stock even if the stock went south it should not have ever went to 0. I understand and accept risk but I don't understand or accept theft. O stole close $10k from me with no basis in law and gave it to the unions.

there was no interest in taking over Chrylser either until the unions agreed to concessions. if the unions at GM would not have had 0 backing them up, they would have been more reasonable in their discussions with possible suitors and the company would have found private funding but the legacy union costs and existing contracts would have taken a beating as they should of.

There is absolutely 0 doubt in my mind that the GM bailout was a gift to the unions; a gift taken out of my pocket illegally by the POTUS.

No worries, if it were my money (and I am sure I had some of their stock in a mutual fund somewhere but nothing like 10k) I would be upset too.

I agree that the unions got a sweetheart deal for votes and the people got hosed in how they structured it, but there are really three questions:

Was there private money in the amounts needed?
Even assuming as I do that there wasn't, should the government have stepped in?
Once they made a decision to step in, should they have done better on behalf of the American people?

We agree on 3, 2 is still hazy for me so I won't say I definitely know the answer (politically the wall street bailouts made it almost a necessity, possibly a million or more middle class jobs lost at an iconic company while bailing out the wealthy bankers wasn't an option they could stomach) the only thing I am speaking of is number 1. But if the private money wasn't there as I have been arguing, the government saved you money because they would have gone belly up leaving you with nothing, or at best a shell of itself, selling off the few profitable pieces to stay afloat.
Honestly, and this isn't meant to sound crass or flippant because i know it was a lot of money you lost and I have been in similar straights with investments... but as completely and utterly poorly managed as GM was and as greedy and intractable as the unions were, that it survived with any stock value is fortunate. Their cars were inferior on the whole in survey after survey and not always cost competitive even then, their employees overpaid and clueless as to what their greed was doing to their company's competitiveness, almost no attention was paid to long term costs by management or the unions until it was too late, management kept giving in to the unions not just on salary but health and pensions for short term peace, very little innovation in their product lines, they gambled far too long on SUVs with little thought to what would happen with a gas price spike...the list of their mistakes was almost endless and whoever took them over was looking at a long term fix with not a ton of upside - as mastoid pointed out the car industry was already saturated. Getting anyone to invest in them with the shape they were in, in that economy and that industry was probably going to be a challenge, as I said I wouldn't be surprised at all if Paulson called around like he did with the banks and found little interest, at which point he pulled the trigger. I do know it was a decision that wasn't done quickly, which lends itself to the idea that they were trying to find another option.

One day, if I ever leave the industry I am in I will talk more about TARP (the source of GM's funds even though it's known for banking) and some of the other bailouts, I have some interesting stories.

[QGator2414]

Honestly, GM's bankruptcy's radical departure from the norm wouldn't be an unreasonable thing for a judge to take judicial notice of. Secured bondholders getting the figurative "shocker" is not what would have happened in any Chapter 11 reorg that wasn't being carefully scripted to protect Obama's contributers, whose contract being voided would have been almost the entire beneficial point of a reorganization instead of a liquidation.

This!