What is the real cost that US taxpayers will foot the bill for "saving" GM? In terms of jobs and money, much more than you think. Had you invested an equal amount on GM stock and stock in Amalgamated Smoke and Mirrors (ASM), you would have made a little money on GM but much more on ASM.
The official projected losses on the GM bailout is 11.2 billion dollars. But only if you share an accountant with Bernie Madoff. Let's look at costs which do not appear in the official ledger sheets.
1) 4.7 billion payment from GM to the US treasury. It sounds good until you realize that the money used to make the payment came from an escrow account made up of taxpayer money. (4.7 billion)
2) Unlike other TARP loans, Obama exempted GM from paying interest, dividends or warrants, like every other bailout company did. If we assume a 1% interest rate for only 2 years, we lost about 1 billion dollars. (The actual amount is much much higher) Now, assuming we paid 3% interest to banks on the money we borrowed for TARP, we paid nearly 3 billion in interest for a net loss of 2 billion. But look at the money we recouped from other companies and compare it to GM. (3 billion)
Money returned to Treasury by bailed-out companies.
Revenue Treasury has earned on its investments through dividend payments.
Revenue Treasury has earned through its loans through interest payments.
Revenue Treasury has earned from selling stock warrants it held on companies that have paid back its investment.
Revenue from fees and sales of equity or other assets.
The difference is staggering. Our estimate is low.
3) And you may remember that Obama bragged about how GM made 3.2 billion in the first quarter after bankruptcy? Now, here's the rest of the story
GM purchased parts supplier Delphi for 2.2 billion dollars. Delphi had an outstanding balance on pension payments for retired workers of 6.2 billion. Obama agreed for the government to pick up the tab for the retirement plan. Then GM sold Delphi for 3.8 billion dollars. GM made a nifty 1.6 billion dollar profit, while taxpayers lost 6.2 billion. So they only made 1.6 billion, not counting the sale of other assets. (6.2 billion)
4) Investors were owed 27.2 billion from GM, but Obama extorted an agreement from them that the debts would be wiped out in exchange for a 10% stake in GM, then worth about 3.6 billion. No cost to taxpayers? Not quite. The creditors were able to take tax writeoffs on the other 23.6 billion dollars and at an effective tax rate of 26%, that means tax payers lost tax revenues of 6.136 billion. (6.136 billion)
5) When a company suffers a loss, they are allowed to write it off from future profits. However, when you declare bankruptcy, you lose the write off, since you no longer owe the debt. GM did declare bankruptcy but Obama changed the rules for GM and allowed them to keep the write off despite bankruptcy. That saved GM 14 billion in taxes. (14 billion)
6) Now on to Obama's dream car, the Chevy Volt. We did not provide GM with any money for building the Volt, however we did give (not loan) the Korean battery maker 2.4 billion to build a factory. Why not an American company? That company is now defunct. And let's face it, I could go to the city dump and gather empty bottles and rags, then buy 10 bucks worth of gasoline if we reallt wanted that many firebombs on the road. (2.4 billion)
7) The current number of money lost in the stocks we took is at 11.2 billion. (11.2 billion)
That totals up for a cost to taxpayers of 47.636 billion dollars. Today, the market cap (Value of company) is 38.55 billion up from the 36 billion it was worth in 2009 when the bailout was made. Does that make sense to you?
Now, on to what we got for our money. In the bailout, GM promised to build a certain number of cars in the US and to invest money in US parts manufacturing for those cars. To date, GM has never once made the number of cars promised and now Obama has waived that requirement altogether.
GM has built an engine plant for 540 million dollars creating thousands of construction and ancillary jobs...in Mexico.
GM is also moving jobs and manufacturing to China. The Obama administration claims that all cars built in China will be sold in China.
From the Washington Examiner
The same month, GM announced it would boost its output from its China plants by 70 percent. It is not just selling Chinese-made cars to the Chinese, either. GM is nearly doubling its export production capacity there from 77,000 units to 130,000. It doesn’t take a Ph.D. in economics to see what is really going on. GM cannot make the domestic production targets and still turn a profit. It wants to be spared the embarrassment of having everyone know that. Obama, who is in this as deep as anyone can be, doesn’t want the embarrassment, either. So both buried the news.
The really pathetic thing is the Obama administration points to the GM bailout as one of their greatest accomplishments. What's even more pathetic is they are probably right, but only because the policies of this administration have been so disastrous.