GM’s Alleged TARP Repayment – Obama Adminstration Helping GM Avoid TARP Tax

As we now know, GM used “new” TARP money to “repay” one of the original TARP loans it received.

One of the motivating factors for this “money shuffle” was to generate positive “Public Relations Press” for both GM and the Obama Adminstartion.

Now it appears thata a secondary motivation was to allow GM and its Union to escape paying the “Financial Crisis Responsibility Fee, also known as “The TARP Tax.”

The following is Senator Grassley’s letter to Treasury Secretary Geitner:

Dear Secretary Geithner:

General Motors (GM) yesterday announced that it repaid its TARP loans. I am concerned, however, that this announcement is not what it seems. In fact, it appears to be nothing more than an elaborate TARP money shuffle.

I am also troubled by the timing of this latest maneuver.  According to Mr. [TARP Special Inspector General Neil] Barofsky, Treasury had supervisory authority over GM’s use of these TARP escrow funds.  Since GM’s exit from bankruptcy court, Treasury had approved the use of the escrow funds for costs such as GM’s obligations to its parts supplier Delphi. According to the GM 8K, GM had planned to use the TARP funds in escrow to pay back the TARP loans on a quarterly basis beginning in the fourth quarter of 2009.  But following the April 20, 2010, hearing of the Senate Finance Committee, where Treasury’s decision to exempt GM from the bank TARP excise tax was questioned and GM’s refusal to testify was noted, it is odd that GM suddenly drew down on the TARP escrow and accelerated the repayment of the remaining balance of GM’s outstanding TARP loans.

The bottom line seems to be that the TARP loans were “repaid” with other TARP funds in a Treasury escrow account.  The TARP loans were not repaid from money GM is earning selling cars, as GM and the Administration have claimed in their speeches, press releases and television commercials. When these criticisms were put to GM’s Vice Chairman Stephen Girsky in a television interview yesterday, he admitted that the criticisms were valid:

Question:    Are you just paying the government back with government money?

Mr. Girsky: Well listen, that is in effect true, but a year ago nobody thought we’d be able to pay this back.

General Motors & Obama Administration – Misleads Press & Public – Loans Repaid With New Bailout Money

As it turns out the Obama Adminstration’s hand pick CEO for GM, Ed Whitacre, was talking out of both sides of his mouth when he proclaimed, “GM has turned the corner” while the Obama Adminstration trumpted the alleged repayment of one of GM’s  ”bailout” loans.

What are the facts?


Yep, taking cash out of one pocket and putting it in another – all of the cash is taxpayer cash – not GM earnings.

GM has at least three outstanding “loans’ made at taxpayer expense. A $60 Billion plus loan that the Government has accepted ”securites for”, an $8 billion dollar “cash loan” that GM allegedly repaid and an open ended “escrow account” that provides GM “operating cash” provided by the Obama Adminstration at taxpayer expense.

What did GM do? GM took cash ourt of the “escrow account” funded by the taxpayers to “payback” the $8 billion dollar cash loan.

Did this “slight of hand” reduce the amount of money GM owes the US taxpayer or reduce GM’s total debt? Heck NO! The “transaction” just changed which account the money was owed to. Just like when people use one credit card to pay another credit card …. a sure sign of financial recovery.  

How dishonest of GM, President Obama, VP Biden and the News Media. Shame on all of them!

Grassley Slams GM, Administration Over Loans Repaid With Bailout Money 

…… the struggling auto giant was only able to repay its bailout money by dipping into a separate pot of bailout money…… accused the Obama administration of misleading taxpayers about General Motors’ loan repayment, saying the struggling auto giant was only able to repay its bailout money by dipping into a separate pot of bailout money…… the charge was backed up by the inspector general for the bailout — also known as the Trouble Asset Relief Program, or TARP….. Watchdog Neil Barofsky told the Senate Finance Committee, that General Motors used bailout money to pay back the federal government …… ”It appears to be nothing more than an elaborate TARP money shuffle,” Senator Grassley said in a letter Thursday to Treasury Secretary Timothy Geithner …. Grassley called on Geithner to provide more information about why the company was allowed to use bailout money to repay bailout money, and how much of the remaining escrow money GM would be allowed to keep…… “The bottom line seems to be that the TARP loans were ‘repaid’ with other TARP funds in a Treasury escrow account. The TARP loans were not repaid from money GM is earning selling cars, as GM and the administration have claimed in their speeches, press releases and television commercials,” he wrote….. Barofsky said, “I think the one thing that a lot of people overlook with this is where they got the money to pay back the loan. And it isn’t from earnings. … It’s actually from another pool of TARP money that they’ve already received,” he said Wednesday. “I don’t think we should exaggerate it too much. Remember that the source of this money is just other TARP money.” 

Barofsky told the Senate Finance Committee the same thing Tuesday, and said the main way for the federal government to earn money out of GM would be through “a liquidation of its ownership interest.” 

Grassley criticized this scenario in his letter. 

“The taxpayers are still on the hook, and whether TARP funds are ultimately recovered depends entirely on the government’s ability to sell GM stock in the future. Treasury has merely exchanged a legal right to repayment for an uncertain hope of sharing in the future growth of GM. A debt-for-equity swap is not a repayment,” he wrote, refering to the $60+ billion dollar loan which the Obama Administartion allowed GM to convert to an “unsecured”, ”security”.

GM To Announce 14 Plant Closures, Monday June 1, 2009

GM to announce 14 plant closures MondayAP

DETROIT – The news no one wants to hear is coming Monday morning to General Motors Corp. factories across the U.S.

The troubled auto giant will identify 14 factories it will close by the end of 2010 as part of its restructuring plan, according to a person briefed on the plans.

The announcement could coincide with GM’s all-but-inevitable bankruptcy protection filing, expected to come by Monday.

Factory-level union leaders have not yet been told which plants will be shuttered, but four vehicle assembly plants will be among those to be closed, along with parts stamping, engine and transmission factories, said the person, who asked not to be identified because the plans have not been made public.

GM has said it plans to close 16 more U.S. factories by the end of next year, shedding 21,000 jobs. Two have already have been announced — an engine plant in Massena, N.Y., and a parts stamping plant near Grand Rapids, Mich.

United Auto Workers union officials in Detroit have been telling plant-level officials that the company will make the announcement rather than the union, according to the person.

GM spokeswoman Sherri Childers Arb would not comment on Thursday.

Auto Bubble Bursts – March 09 Auto Sales Down 40% – Tax Dollars To Fund High Risk Auto Loans

Just 2 days ago certain commentators incorrectly reported a  25% sales jump  

Too many cars, and they’re not on the road

After ‘car bubble’ collapses, excess inventory creates a backlog

WASHINGTON – The sea of new cars, 57,000 of them, stretches for acres along the Port of Baltimore. They are imports just in from foreign shores and exports waiting to ship out — Chryslers and Subarus, Fords and Hyundais, Mercedeses and Kias. But the customers who once bought them by the millions have largely vanished, and so the cars continue to pile up, so many that some are now stored at nearby Baltimore-Washington International Marshall Airport.

The backlog exists because many of the factors that contributed to the collapse of the housing bubble — cheap credit, easy financing, excessive production, consumers buying more than they could afford — undermined another large and vital American industry.

“There was a car bubble,” Steven Rattner, who President Obama recruited to head a Treasury Department group charged with finding solutions to the mountain of problems facing the American auto industry, said in an interview last month. “We had this artificially high sales rate.”

During the boom years of the early and mid-2000s, automakers were selling more than 16 million cars a year in the United States. They are on pace to sell fewer than 10 million this year. General Motors posted a 44.5 percent drop in March compared with the same month a year ago. Ford’s sales tumbled 41.3 percent. Chrysler’s fell 39.3 percent. Toyota’s sales fell 39 percent, and Honda’s dropped 36.3 percent.

One of the key questions the auto task force must answer is figuring out a sustainable number of annual auto sales. Only then can it determine the best way forward for U.S. automakers. “You had a huge number of cars being sold,” Rattner said, “so I don’t think it is prudent to assume the sale levels are going to back to those levels.”

Confidence and easy cash
What drove sales so high in the first place?

In short, the same confluence of confidence and easy cash that fueled the housing boom.

“Consumers felt good about their future,” said Mark Pregmon, a SunTrust Bank executive and chairman of the automotive finance committee of the Consumer Bankers Association. “It was riding the wave of the ‘go’ economy. Stocks were rising. Equity in houses was rising. People felt they could just borrow off their house. Their house was their ATM machine.”

Car companies did their part to entice consumers.

“Loose credit, incentives, leasing — it really kind of fed the beast,” said Jeff Schuster, executive director of forecasting for J.D. Power and Associates. “That made many cars that might have been out of reach affordable.”


In turn, Americans bought more cars and bought them more frequently. They spent more money than they could afford, thanks to loans that stretched six years or longer, even for buyers with shaky credit. Rental car companies and municipalities turned over their vehicle fleets more often. And the automakers kept churning out cars to meet the very demand they had helped create.

“You keep doing what you’re doing, and you just keep assuming that growth is going to go on forever. And then at some point it just drops out from under you,” said Alan Pisarski, a transportation expert and author of “Commuting in America.” He compared the years of overproduction to putting a Burger King on every street corner. “The world just can’t use that many hamburgers,” he said.

When the bottom finally fell out, many people found themselves with loans worth more than the cars, just as millions of Americans owe more on their mortgages than their homes are worth.

“People were taking all kinds of risks buying cars beyond their means,” said John Townsend, a spokesman for AAA Mid-Atlantic. “The cars that they drive are not worth what they owe on the car.”

The result has been an increase in the repossession rate for autos, he said, as well as higher delinquency rates on car loans and fewer people venturing onto the nation’s car lots.

“The uncertainty in the economy is causing consumers to postpone making big-ticket purchases,” said Jesse Toprak, an analyst with “Cars are the second-most expensive purchase a consumer can make after their homes. We are seeing consumers holding on to cars longer than in the past. The average used to be 4 1/2 years, and now is probably going to go over six years.”

In addition, many auto repair shops and do-it-yourself retailers such as AutoZone have seen a boost in business as the GMs and Chryslers of the world have suffered.

“The big question is, how do you jump-start auto sales again? Or can you?” Townsend said.

The big automakers are certainly trying.

GM and Ford have announced programs that assist buyers with up to nine months of car payments if they lose their job. Car loans in many markets are becoming easier to get, though most buyers have to show that they are employed and earn enough to cover both a mortgage and a car payment. GM announced this week that it would lend to buyers who had credit scores below 620, which is considered a high-risk, subprime consumer market. A few months ago, the credit score threshold was 700.

[Isn’t that how we got here – making loans to people who could not pay them back – The same thing is happening in the Mortgage Market. The Sub-prime market is opening again] 

GMAC, the financing arm of GM, has taken steps to reduce the cash crunch many dealers face by temporarily waiving some dealer fees, eliminating loan payments on aging unsold cars and postponing wholesale interest charges. It also announced that it would make $5 billion available over the next two months to expand lending to potential car buyers. [$5 Billion of taxpayer money to expand risky auto loan programs]


Employment is key

Most analysts agree that the auto market will probably not rebound until people feel more secure in their jobs. As with housing, an intrinsic link exists between the health of the economy and the health of the auto industry.

“There’s a tremendous correlation between people who work and own automobiles,” Pisarski said. “If you look at where the cars are, that’s where the workers are. If employment doesn’t grow, car ownership doesn’t grow.”

The shaky economy has kept consumers at bay. Nine hundred car dealers closed in 2008. The National Automobile Dealers Association calculates that another 1,200 will shutter this year.

While it lasted, the car bubble effectively masked significant structural problems at GM, Ford and Chrysler, as well as at foreign automakers like Toyota, which ramped up production in the United States in recent years but suddenly found itself burdened with inventory it couldn’t sell.

The bursting of the bubble has exposed the precarious nature of the industry and made clear that bankruptcy might be the most feasible option for U.S. carmakers.

In the meantime, new cars nobody wants to buy continue to pile up in Baltimore and at ports around the globe. Last month, when space filled up at one Swedish port, Toyota was forced to lease a cargo ship as a sort of floating parking garage for 2,500 unsold cars.

Is The Worst Over? Economic Recovery? The Unvarnished Numbers Tell The Story.

This headline greeted me this morning:

World markets surge as US data boost recovery hope

US Data? What US data can they be talking about? GM, Chrysler and Ford posted huge additional losses.

The article then went on to say some very surprising things: “Nearly every sector in Asia charged higher, with carmakers like Toyota Motor Corp. and Nissan Motor Co. rallying on U.S. auto figures that were less dismal than feared.” Really, rallying on US auto figures – just what were those figures?

‘Investors were encouraged after U.S. car sales jumped by nearly 25 percent last month from February, beating the typical rise and underpinning hopes of a turnaround in the American auto market — critical for Asia’s giant auto companies.’ What? Auto sales “jumped” by 25% last month – I don’t believe it, do you? (I don’t believe it for good reason – I know the real numbers).


“A rebound in pending U.S. home sales in February from a record low, as well as improving manufacturing activity, added to a growing belief the most severe global downturn in decades may be moving close to a bottom.’ What? Housing sales are up? Where? By whose count? Manufacturing activity is up? By what measure and whose numbers. I’ll provide the unvarnished numbers shortly …..

“Still, the upbeat evidence distracted investors from more sobering news the U.S. private sector continued to shed hundreds of thousands of jobs last month — a worrisome sign as investors brace for Friday’s report on nationwide job cuts.” Yes, those pesky unemployment numbers – preliminary projections announced yesterday were absolutely awful – the specifics to follow.

You can imagine my surprise when 3/4 of the way through this same article the following sentence appears,

“With the economic crisis still far from over, analysts warned of more painful market volatility as the recession unfolds.”

Recession unfolds? Unfolds? One would think the recovery was underway based on the previous statements. This is beyond shoddy journalism, this is unethical reporting.  

My point is this, the data suggest we have not hit bottom, plain and simple. I’m looking forward to the turn around as much as the next person. That turnaround is expected to beging in 6 to 12 months. Misrepresenting where we are at now can cost individuals a fortune with bad investment advice and can harm the recovery by setting false expectations that can only lead to disapointment. The truth is this; the economic elevator from hell, that we are all riding, is still heading down. It’s descent may be slowing but there is no sign that it is about to stop.

I’m glad to see that stock prices are rebounding from their 12 year lows, but as unemployment continues to grow and as the prosepcts for profits and dividends remain bleak, there is more than a possibility that these gains will be surrendered and that the markets will test new all time lows. Spending, taxes and the possibility of runaway inflation remain serious concerns.

Wildly incorrect headlines maybe spurring people to re-enter the markets prematurely. Without a return to broad based profitability and dividend payments increased stock prices may not hold. Beware a “Bear Market Bounce” and don’t confuse “trading activity” with “investment activity”. Good Luck and lets hope for the best.

Hope aside – here are the unvarnished numbers.

Auto Sales: 

US Auto sales are down, horrifically down. The report above so badly misrepresents the true state of auto sales in the US, I have to question the author’s ethics. The numbers simply don’t support, in anyway, the statement made above. The statement above can actually be harmful. If one were to believe auto sales were on there way back, one might fight necessary change to “broken business models”. What do the numbers show?

Sales of new cars and trucks are down 36.8% in March 2009 compared to March 2008.

The Boston Globe reported this yesterday: “Automakers began 2008 expecting the worst year for U.S. auto sales in a decade. So far, they’re getting what they anticipated.Sales dropped by double digits in March, even for usual stalwarts like Toyota. And with fragile consumer confidence, falling home values, tightening credit and high energy prices, it may be some time before auto sales recover.

Current sales figures indicate 1,000,000 fewer cars will be sold in the US in 2009 than last year and last year was one of the worst years in memory. Continued sales reductions mean continued cutbacks, not growth , new jobs or new auto plants. 

Remember 1 year ago, March 2008, GM sales figures were down 19% compared to March 2007, Ford’s sales were down 14% over March 2007.  Chryslers sales were down  21.2% in March 2008 from March 2007. .

Having a year in which year to prior year sales drop 40%, after a nearly 20% drop in the prior year, is horrific.

The March 2009 sales drop is twice as large as the sales drop in 2008. You may be asking, what data did they base these incredible claims of increased car sales on – it is this – car sales increased from February 2008  to March 2008. The fact is Car sales always increase from February to March. Car sales last year, one of the worst years for car sales in memory, still reflected an increased number of sales between February and March. The important or meaningful comparison – March 2008 to March 2009 sales numbers. By that measurement sales are down by almost 40%. As to car sales, the economic elevator has not even begun to slow, it is still acelerating. To misrepresent this number does a disservice to everyone.  To claim that the data presents a picture of a recovering car market is false. Year to year sales are down 40%. In 2008 when sales were down 1/2 that amount(20%)  the press described the drop as “falling of a cliff”. Now that the sales drop is twice that large, it is being reported as signs of a turnaround. GM’s sale decrease between January 2008 and Jaunuary 2009 was 49%. GM’s auto sales in February 2009 were down 53.1% from February 2008.   

 Home Sales:

First, some related news, “Modified Mortgage Refinances Continue to Re-default”, “US bank regulators continue to report escalating re-default rates on mortgage loan modifications. Data being assembled by bank regulators is showing a steady trend of rising month-over-month loan work-outs falling back into delinquency within six months.” “One very troubling point is that, whether measured using 30-day or 60-day delinquencies, re-default rates increased each month and showed no signs of leveling off after six months or even eight months,” John Dugan, head of the Office of the Comptroller of the Currency, said in a statement. Defaults rose consistently across all loan types, but subprime loans understandably had the highest re-default average.”

Mortgage refinancing is up, but refinancing does not indicate an increase in home sales. Real estate investment purchasing is down 18.1% from a year prior.

Last year (March 2008) existing home sales fell 19.1%. The median home price was $200,700, down 7.7% from March 2007.  March 2009 home sales have declined 8.6% from last year. The median price of a home today is $170,3000. So despite a drop in price (Value) of the medican home by $30,000,(17%) sales continue to decline year to year. The percentage decrease is smaller this year, but I’m not sure that is a signal that the elevator is slowing. As mortgage defaults or forelcosures continue and as unemployment numbers continue to worsen, I don’t know that a housing recovery can be predicted. What doesn’t need to be predicted, it can be stated, Home Sales did not incease, they decreased again, from March 2008 to March 2009. The decrease was by 8.6%. Home sales were said to be at “crisis” levels in March 2008 and we have a further reduction so far this year. While there is no need to panic, these numbers so no signs of a pending recovery.

New home sales posted 331,000 seasonally adjusted annualized units in December. New home sales were off 13.9% from November’s pace and 44.8% below the pace in December 2007.

Meanwhile US banks experienced a 149% increase in bad loans in 2008.

“banks face many risks in the coming months due to souring loans and investments which will impair capital through large credit writedowns. The central tenet of this site is that writedowns = reduced capital = reduced credit = reduced growth prospects.” “Loan losses for U.S. commercial banks are expected to rise to 3 percent by the end of 2010, from 1.5 percent in the third quarter of 2008, hurt by an increased percentage of bad loans, greater consumer leverage and faster problem recognition by banks”, ” Loan losses might even surpass the 3.4 percent loss levels reached in 1934 during the Great Depression as the industry has taken on increased structural risk in addition to mortgages that should become more apparent during the cyclical slowdown”


In it’s Budget Plan the Obama Administration predicted that the recssion would bottom out some time before year end 2009 or early in 2010. Unemployment levels were predicted to bottom out at 8.1%. This prediction was made 3 weeks ago, in early March 2009. . Those predictions have already proved to be overly optimistic as the February unemployment numbers (released in March) indicated that the unemployment rate had, in fact, already hit 8.1%.  An additional 651,000 jobs were lost in February 2009. Unemployment increased 1/2 a percentage point in February. Unemployment last year (February 2008) was 4.8%. Unemployment increased 60% in the 12 months between February 2008 & February 2009 .

Preliminary unemployment numbers for March continue to be bleak. “There is no sign of even a temporary easing in the downward pressure on employment,”Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a client note.

Initial claims have topped 600,000 for seven straight weeks, a level that many economists say is consistent with another huge drop in net payrolls when the Labor Department issues its monthly employment report next month. Net job losses could top 700,000 in March, Shepherdson said, which would bring total losses to above 5 million jobs since the recession began in December 2007.
Unemployment for March 2009 may hit 9%. The unemployment rate in March 2008 was 5.1%.
The unemployemnt rate has risen from 7.6% in January 2009 to  what might be 9% at the end of March 2009, an increase of 1.4% in 90 days. The unemployment rate increased 2.7% (from 4.9% January to 7.6% in December) in all of 2008.

Unfortunately, the unemployment numbers show no signs of imporvement or that a recovery is at hand.“Reports from the twelve Federal Reserve Districts suggest that national economic conditions deteriorated further during the reporting period of January through late February.  Ten of the twelve reports indicated weaker conditions or declines in economic activity; the exceptions were Philadelphia and Chicago, which reported that their regional economies “remained weak.”  The deterioration was broad based, with only a few sectors such as basic food production and pharmaceuticals appearing to be exceptions.  Looking ahead, contacts from various Districts rate the prospects for near-term improvement in economic conditions as poor, with a significant pickup not expected before late 2009 or early 2010.

Economic Activity 



Economic Output

“US economic output slumps.” “The United States economy shrank at a rate of 3.8 per cent in the fourth financial quarter of 2008, formally plunging the country into recession, the US government has said. The figure marked a sharp drop compared to the third financial quarter, in which the growth rate fell by only 0.5 per cent, the commerce department said on Friday.” ,

World growth is projected to fall to ½ percent in 2009, its lowest rate since World War II. Despite wide-ranging policy actions, financial strains remain acute, pulling down the real economy.

Economic Report: Industrial Production: US industrial production, output at the nation’s factories, mines, and utilities, decreased a hefty 1.8% in the month of January, after falling a downwardly-revised 2.4% in December, according to the Federal Reserve. After declines in five of the last six months, production has decreased 10% in the past year, an astonishing number. The report was significantly below estimations, as economists were expecting a 1.5% decrease in output. Capacity utilization, a key gauge of inflationary pressures, fell to 72% from 73.6%. This is the lowest level since February 1983, and 9 percentage points below its average level from 1972 to 2007. Lower capacity usually leads to slower inflation, as producers compete with each other for work.

Global Business Cycle Indicators: Leading Economic Indicators declined in February. The weaknesses among the leading indicators have remained widespread in recent months.

National Economic Update: “Recently released data indicate that the economic contraction has intensified at a pace associated with severe recessions. Two consecutive quarters of negative real growth, striking job losses and deep declines in both manufacturing and services output defined year-end 2008. While the economic outlook remains bleak for the first half of 2009, a few indicators suggest that the pace of contraction may slow in coming months.” The rate of contraction “maybe” slowing in the months ahead – not that the descent on the economic elevator to hell is slowing at this time. 

Durable Good Orders Drop: Durable good orders also painted a grim outlook. “Demand for U.S.-made durable goods fell for the sixth straight month in January.  Orders for durable goods  such as PC’s,  planes,  and washing machines fell 5.2% in January. Orders fell in every major sector”. Early indications for March are not good. For both the Philly and New York Fed manufacturing reports, the new orders index fell in both February and March. Both surveys have data for a given reference month that overlaps two actual months (the March report includes data from both late February and early March).

The datum does not suggest the recovery has started, but the descent into hell maybe slowing. We are still descending, but not as quickly. Lets hope the policies being implement are the correct ones and we don’t suddenly accelerate into oblivion. I, for one, doubt that we can spend our way out of recession or borrow our way out of debt.

Remember this, the Stock Market is not the “economy”. The Stock market can rise without any underlying economic improvement. During many of the years of the Great Depression (1929 – 1941) the Stock Market rose while Economic conditions deteriorated. In fact the DJIA increased in 6 of the 12 years of the Great Depression.

The Auto Bailouts: Mr Obama We Know Double Talk When We Hear It

Let me refresh your memory.

Immediately after the Banks received a “bailout” last fall the Automakers and the UAW went to Washington begging for tax dollars. Seems the Automakers and the Unions couldn’t run their business successfully so they needed Tax Payer money to foot the bill for their failed business model. High labor costs  and crappy cars are a bad business mix.

Congress waffled and the Companies and Union were sent packing. They were told to go home. Review your business plan because it doesn’t work. Fix your business plan and come back and we will see if  we can do something for you.

The UAW came back with the Automakers. They had no new plan. They had reached no agreements. They had fixed nothing and they had changed nothing. This was their second trip.

What happened? You already know. A temporary loan was given to the bums. “Temporary Loan” is Washington double-talk for “bailout”. A nearly $8 Billion dollar bailout. The Automakers and the UAW were told – now look – this is your last chance – go back and devsie a business plan that will, at some date certain in the future, provide a road map for you to be “viable” or “profitable”. Don’t dare come back without a “viable” business plan.

The bums rerturned – again they had no plan – no concessions and no clue how to get to be viable. Washington responded with additional cash (an additional $9 Billion) and an additional admonition – don’t come back without a plan or well will make you repay the money immediately. You have until the end of March.

Remember, we will see you in March 2009 and if you don’t have a viable business plan, we will call your loans and direct you to Bankruptcy Reorganization.

Before the UAW and the Automakers can return to Washington with a “plan” – Washington volunteers an additional $5 Billion in cash – not directly to the Automakers but indirectly – Washington will pay $5 Billion in Automakers debts to “Parts Suppliers”. Washington tells the American Taxpayer – “Oh, that money isn’t automaker bailout money. It went to part suppliers”. Just how stupid do they think we are. The fact that $5 Billion of the Automakers debts were paid kept their lights on until they could return to Washington. If the Government had not paid those “Part Suppliers” debts – the Automakers would have run out of Bailout cash in early February, a month before the schedulked return to Washington – Obama could not have that happen.    

Now it is March and here comes the Automakers and the UAW. A fourth trip to Waashington. Still there is no plan. There have been no concessions, just tentative agreements. Independant Financial Analysts report neither GM nor Chrysler are “viable”, ongoing, concerns.

Obama’s Auto Task Force agrees. GM and Chrysler are not viable. The Task Force needs to be renamed, The Auto Bailout Task Force.

So what happens next. What we knew would happen all along. (See: where this was predicted) .

GM and Chrysler get the cash without having plans. The automakers get additional time to complete the job they have not been able to complete during the last 15 years – to find a way to compete globally and do so at a profit.

The American Taxpayer is on the hook again. Billions in additional auto bailouts. (Washington won’t even specifiy how mush more they have agreed to spend – just “all necessary operating cash”).

As to Chrysler and Obama’s proposal – the American Taxpayer will underwrite Chrysler’s ongoing operations until Chrysler and  Fiat finalize a partnership agreement. Such an agreement is guaranteed. Why do I say that? See: where the preliminary Fiat/Chrysler agreement is reviewed. The US Taxpayer will provide Fiat with between $6 Billion and $20 Billion in cash to take Chrysler over. Fiat brings no cash to the table at present. Within 12 months Fiat will be allowed to “buy” a controlling interest in Chrysler for $25 Million Dollars. ($10 cents for every US Taxpayer dollar invested in this scheme). Fiat is under no obligation to keep Chrysler operational. Just like Daimler, Fiat can walk away at anytime. Fiat can pick up $6 Billion  to $20 Billion for agreeing to payout $25 Million for a controlling stake in Chrysler. I’m sure the Fiat Attorneys can structure a deal that protects Fiat from assuming Chrysler’s legacy costs.  

As to GM. The same old, same old. More operating cash. Why isn’t this company simply referred to bankruptcy re-organization where it belongs.

Mr Obama made some additional announcements. Some of those commenst are absolutely shocking. Not unexpected, but shocking.

Fisrt, the American Taxpayer will now be on the hook for “warranty repair costs” for all GM or Chrysley Cars sold this year. All of the unemployed, all of the middle class workers who don’t buy new cars and don’t have the luxury of a new car warranty, the workers who struggle to pay for the repairs to their own autos will now be on the hook to pay for other people’s auto repairs. Billions in hidden costs to the American Taxpayer’s to back New Car Warranties. MR OBAMA YOU ARE SIMPLY OUT OF TOUCH.

Mr Obama also said that the UAW and its workers have no blame in this mess. The rest of America knows otherwise. Hell, a significant number of UAW members will even admit this. The UAW has a great deal of blame. The majority of the blame, as a matter of fact.   

Mr Obama – UAW workers were responsible for the demise of “Quality” in the American auto industry. I don’t want to hear how great GM and Chrysler cars are today. All your political spin aside that is a proposition in serious question. The Amercian Public questions that claim and perception is reality in the sales business.

The UAW and its leaders are responsible for the outrageous contracts and salaries paid to UAW workers. Even when one uses the UAW estimate for the wages and benefits paid to UAW workers it is apparent that those workers earn $150,000 per year with overtime. ( . That is an amount equal to 3 times the median salary in this Country. If workers are making 3 times as much as their neighbors, how do you expect their neighbors to afford the products they produce.

The UAW is primarily responsibe for the fact that the  American Auto Manufacturers have never saved enough from the profits in the good times to weather the bad times. Billions upon Billions were paid out as bonuses to the UAW when the Automakers were profitable. The UAW opposed saving for a “rainy day” with labor strike after labor strike.

Just 1 year ago today (March 2008)  long after this recession had started, the UAW workers went on strike, shutting numerous auto plants in the US andd Canada. Neither the UAW Leadership nor the workers believed the proven facts – the Amercian Auto Inductry was on the brink of bankruptcy – in fact they were already bankrupt – the just had not run out of cash. When presented with the “facts” the UAW Leadership failed to lead  the UAW Leadership encouraged the strikes. Now how is it that the UAW is blameless. , , , , ,

Mr Obama claims the Government has no interest in running GM. What Bull Shit! The President fired the GM Chairman and his Auto Task Force will develop the so called “restructuring plan” for GM and Chrysler. Unnamed Administration Officails have also stated that GM’s Board of Dircetors will be replaced. What else do you need to do to “run a company”. (By the way, former GM Chairman, Rick Wagoner, will leave with a $20 Million plus Golden Parachute – True, he worked for GM for 40 years – but $20 Million? How long will it be before Obama claims he did not know about this severance package?).   

Mr Obama – why was the UAW President, Ron Gettlefinger, left in place?  If it takes “two to tango” – Gettlefinger was Wagoner’s dance partner. Just another Uni0n Pay Off, Mr Obama?

The next political election may be 20 months off – but American’s can vote before then. Just don’t buy GM or Chrysler. The Political Polls have been telling Washington that very fact for months. 80% of those surveyed say they will not buy an auto from a car company that takes Government cash. Listen Up Washington. Amercians won’t do business with companies who participate in your bailout BS.

Mr Obama, we are not as stupid as you think.  

Stop wasting taxpayer dollars and send GM & Chrysler to Bankruptcy re-organization where they belong.

The New Auto Bailout – Costs To Taxpayer Increases to $710,000 Per GM Employee

The following Associated Press article appeared on

GM says 7,500 hourly workers decide to leave

DETROIT – About 7,500 General Motors Corp. workers have signed up to take buyout and early retirement incentives to leave the company, the automaker said Thursday.

Also, Chrysler LLC said Thursday it would extend its offers to entice blue-collar workers to leave the company. The old deadline was Friday.

At GM, about 12 percent of the company’s U.S. hourly work force of 62,400 decided to leave, most through early retirement offers.

GM offered $20,000 cash and a $25,000 voucher to buy a car to all of its hourly U.S. employees in an effort to further trim its blue-collar work force to match reduced sales. company. [$20k cash and a $25k car – $45K total cost – paid for with Taxpayer Dollars from Auto Bailout #1. How many of the nearly 10 Million Americans currently looking for new jobs received  a $45K payout? These same Americans will be asked to pay for this largesse with higher taxes when they find work? In Detroit, Union officials are quick to take credit for these “buyout” payments. As if the payments come from UAW cash and not from the American Taxpayers, who, to date, have  not consented to these payments ] 

The deadline to decide was Tuesday, and many of the workers waited until the last minute to turn in their paperwork. The workers have seven days from the date they turn in the paperwork to rescind their decision, so many will have to decide by March 31.

For those that will leave, the effective date of their departure is April 1.

Both GM and Chrysler are living on a total of $17.4 billion in government loans and are seeking another $21.6 billion. [Living on and making these incredible “buyout offers” at Taxpayer expense] The Obama administration’s auto task force has indicated it may offer more aid, but further concessions are possible from both the companies stakeholders. [Auto Task Force or Auto Bailout Team? Neither GM nor Chrysler has presented a plan establishing that they will be “viable” by any date certain – a requirement previously imposed on these Automakers before any additional cash was to be handed out]  

Both companies have to submit finalized restructuring plans to the federal government by March 31. [The plans that were due this past December! Anyone want to bet on additional cash and an additional extension of time from the Obama Administration].  

The latest round of buyouts and early retirements at GM was the third for the company since 2006. From all three offers, more than 60,000 workers have decided to leave the company.

After the 7,500 take their “buyout” and leave, GM will have 54,900 remaining hourly workers. (62,400 – 7,500)

The cost of “Bailout” part 1 ($17.4 Billion) and “Bailout” part 2 ($21.6 Billion) is $39 Billion Dollars.

If  you divide the cost of the “Bailouts” by the number of hourly GM employes   ($39,000,000,000 / 54,900 =) you get the figure of $710,000 per employee. (Seven Hundred And Ten Thousand Dollars Per Employee).

The UAW reports that the average hourly salary for Auto Workers is $55 an hour. ($40/ hour in wages, overtime and vacation pay plus $15 per hour in “benefit” costs: total: $55.00) This number does not include the additional $15 to $18 per hour “legacy costs” paid by the “Detroit 3″ .

Using just the UAW calculation for hourly salary ($55 /hr) and a standard 40 hour work week over 52 weeks you can calculate an average yearly salary of  $114,400. (This is an under-estimate as the actual number of overtime hours have not been added into the equation). 

What does this mean? “Bailouts”  part 1 & 2 will not only cost Taxpayers $710,000 per GM employee, but if you want another way to look at the numbers – it will cost Taxpayers the equivalent of 6.2 years of salary for evey GM employee in North America.

Don’t forget, they will be back for more money – no one is even pretending that this is enough cash to actually fix the problems, if , in fact, the problems can be fixed.

Tell Washington To Say No To More Bailouts:

Do you find it surprising that a working couple employed by the “Detroit 3″ can earn in excess of $250,000 a year?

Does that change your perspective of  who you consider to be ”rich”? 

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