"Government Motors" returns to top of world's auto sales

That is insane. Lending someone money always entails risk that you won't be paid back. But that presupposes that the Federal government isn't going to step into the transaction with public money and decide based on political cronyism who gets favored treatment and who doesn't!

Taxpayer money should never have come anywhere near the situation, but once it did, they not only put us all on the hook for tens of billions of dollars of debt, they threw bankruptcy rules out the window. If GM had gone bankrupt, in order, secured debt holders would have been paid back first (the banks), followed by unsecured debt holders (bond holders), followed by stockholders IF there was anything left.

GM had assets to make good on its debts. So if you had made a risk calculation and bought unsecured debt, you certainly could have made an accurate risk calculation -- and then gotten screwed by your own government, which arbitrarily changed the rules on you!

What they got in return, rather than the money they were owed, was a small inequitable amount of equity in the new company. They made out worse, because their government screwed them.

The responses to my earlier post just make me shake my head. If GM had gone bankrupt, the company wouldn't have stopped operating. The administration sold what it was doing on a deliberate lie. Bankrupt companies rarely just shut their doors. Courts actually keep any parts that are operating profitably up and running, because that is an asset.

What really happened is that the government swooped in and ignored all property rights protections that are supposed to be guaranteed in America, and one VERY UNFAIR outcome it made happen was the screwing of bondholders (and stockholders to a lesser extent) by having their wealth stolen out from under them.

What makes me sad is that a lot of people don't understand how this wasn't a stabilizing event. It deeply indebted us at a time when can ill afford more debt, for one thing. But probably even more importantly, it made corporate investment in this country even riskier, because it created an uncertain and unlevel playing field by establishing a precedent of the government being able to arbitrarily step into private property situations and screw some people out of their rights.

 

Professor? That would make you Gilligan.

 

For what it is worth, nearly every auto manufacturer announcing sales were up in January. GM announced that sales were down more than 6 percent.



What a disaster. Shareholders and bondholders had their wealth stolen out from under them, and of course our Federal government has no clue how to run a profitable business.

In particular, the Chevy Volt has been a mess -- we have taxpayer-funded business producing cars that politicians love, but for which there is no market.

Last month, Audi's president of North America called the Volt "a car for idiots," because it competes with a Toyota Corolla, but sells at a $15,000 premium.

I realize he is married to diesel, but he's not wrong. The car has an MSRP of $40,000, and taxpayers are forced to subsidize people who buy them, so each purchase ads $7,500 to our national debt (after the tax credit it costs around $32,500).

But it's much worse that that. An analyst at the Mackinac Center for Public Policy, which focuses on Michigan, added up all the state and Federal incentives that have gone into the components of the Volt, and came up with the figure of each car costing taxpayers up to a quarter of a million dollars (based on the 6,000 cars they have sold).