Remember that masterful GM bailout that saved the US auto industry?

Election time, so some politicos are back to touting how the Feds “saved the US auto industry”, so I thought it was time to do a quick retrospective on the bailout.

Let’s put a stake in the ground: Ford didn’t take any Federal bailout money.

Since share price is a measure of financial performance, how has Ford stock performed?

Simple answer: At par with the S&P 500 when measured from pre-financial crisis levels …  better than the S&P if measured from the financial crisis trough. (Ford is the thin green line on the chart, S&P is the blue).

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And, how has the Fed-saved GM done?

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First, some history …

Before the meltdown, GM had a market value of about $40 million.  That slid during the financial crisis and was totally kaput when GM went chapter 11.  Per the bankruptcy terms, secured creditors lost about 90% of their $30 billion in outstanding loansabout $27 billion.

Let’s round and call it $65 billion up in smoke.

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The Feds threw about $50 billion into the pot to “save” GM.

The  new, debt-free GM IPO’ed … about 1.5 billion shares at $33 … for a market value of about $50 billion.

A major holder of the IPO shares: you and me via the US Treasury (about 60% of the shares — conversion of the $50 billion in gov’t “loans”).

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What’s happened since?

The S&P 500 has gone up about 75% since the date of the GM IPO.

New GM shares are now trading about to% to 15% below the IPO price … market value is in the low $40 billions … and sliding.

Ouch.

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And, who took the biggest hit?

You guessed it: Besides the widows & orphans who were holding “old” GM stock and the creditors holding so-called “secured” debt, it was you and me.

According to a Reuters recap:

The U.S. government spent about $50 billion to bail out GM.

As a result of the company’s 2009 bankruptcy, the government’s investment was converted to a 61 percent equity stake in the Detroit-based automaker.

Treasury whittled down its GM stake through a series of stock sales starting in November 2010, with the remaining shares sold on December 9, 2013.

The U.S. government lost $11.2 billion on its bailout of General Motors.

Bottom line: “Old” GM investors and creditors lost about $65 billion … you and I lost over $11 billion … and shares are trading below the IPO price despite a  rising tide in the stock market.

The big winner: the UAW.   Most  union jobs  were saved and the union’s outsized pension plan survived — largely intact.

A success story?

You decide …

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#HomaFiles

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