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Government Motors...a success story.

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Government Motors...a success story.

Postby Average Joe » Mon Jul 12, 2010 10:08 pm

Obama and the Democratic leadership though it was prudent to save GM. Republicans and Libertarians ridiculed these efforts as socialism and a waste. Let it fail, they screeched, clutching their tea-bags like Barbara Bush clutches her pearls. Once again, on the wrong side of history.

From businessweek.com:

Yet based on one analyst's figures, GM may be worth $47 billion, more than Ford's stock market valuation of $36 billion.Looking at factors including potential earnings and cash flow, assets, and liabilities, JPMorgan Chase (JPM) analyst Eric Selle puts a $70 billion price tag on GM. That would equate to an eventual return of 47 cents on the dollar for holders of bonds issued by GM before its bankruptcy that will be converted to stock and warrants in new GM. Based on the price those bonds traded at in early July, GM's value would be $47 billion.

Why the higher price tag for GM? For starters, the company has a better balance sheet. Thanks to the government-sponsored bankruptcy, GM owes just $15.4 billion to its creditors and has $30 billion in cash. After paying down $4 billion of debt on June 30, Ford owes some $27 billion and its cash hoard is below $20 billion


http://www.businessweek.com/magazine/co ... 957997.htm

GM's bonds are going to be sold and the government will be repaid with a profit. And thousands of jobs were saved along the way.
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Re: Government Motors...a success story.

Postby Crockett » Tue Jul 13, 2010 8:15 am

Again...
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Re: Government Motors...a success story.

Postby Crockett » Tue Jul 13, 2010 8:22 am

How are the stockholders doing?
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Re: Government Motors...a success story.

Postby Average Joe » Tue Jul 13, 2010 8:48 am

The stockholders are doing exactly the same as they would have had GM been allowed to fail. But thanks to the action of the administration tens of thousands of good American jobs were saved, GM is returning to profitability and the bonds that saved the company will be sold for shares in the not too distant future repaying the American taxpayer with a profit.
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Re: Government Motors...a success story.

Postby Crockett » Tue Jul 13, 2010 10:19 am

And any start-up companies that could have stepped in to make a better, more efficient, perhaps more innovative product have been squashed. At least until GM fails again...like it always does...
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Re: Government Motors...a success story.

Postby fisticuffs » Tue Jul 13, 2010 10:22 am

And any start-up companies that could have stepped in to make a better, more efficient, perhaps more innovative product have been squashed. At least until GM fails again...like it always does...


Sure. Let's just throw a couple hundred thousand more people out on the street. Surely the banks will lend them money to start up a new company. Does GM's continued existence somehow prevent people from starting these businesses? No it doesn't The biggest thing preventing that is getting the start up capitol.
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Re: Government Motors...a success story.

Postby Crockett » Tue Jul 13, 2010 10:31 am

fisticuffs wrote:Does GM's continued existence somehow prevent people from starting these businesses? No it doesn't


Does the government's artificial perpetuation of a failed, inefficient oligopoly crowd out start-ups? Dude, you desperately need an econ course.
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Re: Government Motors...a success story.

Postby jonnygothispen » Tue Jul 13, 2010 10:33 am

It would be extremely difficult to "start-up" with all the tooling and equipment GM already has, to start another company based on all new designs. But I'm curious, didn't GM agree to these terms under Bush, and didn't they then come to naught under Obama because GM failed?
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Re: Government Motors...a success story.

Postby Crockett » Tue Jul 13, 2010 10:36 am

fisticuffs wrote:The biggest thing preventing that is getting the start up capitol.


This is definitely part of the problem. But this problem stems from the government's continuing bail-out of the banking sector (they're putting the cash back on their balance sheets instead of lending it out). And that problem stems from government's lack of oversight of the banking sector.

We need more regulation and fewer bailouts. Let businesses fail; but don't let them get big enough to take down the system. The government is as guilty as Goldman Sachs.
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Re: Government Motors...a success story.

Postby Henry Vilas » Tue Jul 13, 2010 10:37 am

If only GM was allowed to fail, then venture capitalists would have invested the hundred of millions of dollars needed to start up a new automobile manufacturer.

Or maybe not.
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Re: Government Motors...a success story.

Postby fisticuffs » Tue Jul 13, 2010 10:39 am

But I'm curious, didn't GM agree to these terms under Bush, and didn't they then come to naught under Obama because GM failed?

Yes much like the bank bailouts these started under Bush with little or no stipulations and continued under Obama with much greater oversight. If GM had gone down they would have been gobbled up by Chinese investors not "Joe I just want to start a multi Billion Dollar Auto Company but The Mean Ol Government is Getting In My Way".
Recession would have been worse. Unemployment would have been worse, crime would have gone up, and what little manufacturing we have left in this country would have taken yet another hit. Tea Baggers seem to hate America. American workers, American products, and The American President.

The idea that letting GM would have made room for anything but pain and suffering for hard working honest Americans is a laughable Tea Bag fantasy.
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Re: Government Motors...a success story.

Postby fisticuffs » Tue Jul 13, 2010 10:40 am

But this problem stems from the government's continuing bail-out of the banking sector


So the reason the banks won't lend is that we gave them money to lend? And if we didn't give them money to lend they'd somehow be lending more?
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Re: Government Motors...a success story.

Postby Crockett » Tue Jul 13, 2010 10:44 am

fisticuffs wrote:So the reason the banks won't lend is that we gave them money to lend? And if we didn't give them money to lend they'd somehow be lending more?


We had to bail them out because they would have taken the system down (thanks to Clinton and Bush's cozy relationships with the banking lobby).

The reason they wont lend is that they have to keep the money to repair their balance sheets.

If we didnt give them money we'd all be living in tents. But that doesn't mean we shouldn't fix the system.
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Re: Government Motors...a success story.

Postby Crockett » Tue Jul 13, 2010 10:47 am

fisticuffs wrote:If GM had gone down they would have been gobbled up by Chinese investors not "Joe I just want to start a multi Billion Dollar Auto Company but The Mean Ol Government is Getting In My Way".


You're basically saying we can't survive without the government's help. Do you think the government started GM, GE, Apple, Exxon, etc.?

We have some of the biggest companies in the world. And our competitive advantages to start these companies certainly did not stem from government bailouts.
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Re: Government Motors...a success story.

Postby jonnygothispen » Tue Jul 13, 2010 10:49 am

In regards to the banks, I think this all traces back to the lack of total CFR re: full public financing of all political campaigns. It's a cozy relationship mainly because it's a race for campaign funding.
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