GM IPO: Auto Bailout Saved More Than 1 Million Jobs, Study Says

[ne_one]

GM IPO: Auto Bailout Saved More Than 1 Million Jobs, Study Says
WSJ
November 17, 2010
by Shira Ovide

No matter what happens with Government Motors, the taxpayer intervention in the auto business appears to be a win for Americans, a new research report asserts.

The Center for Automotive Research said today the government’s bailouts of the U.S. auto industry spared more than 1.14 million jobs last year alone, and prevented “additional personal income losses” of nearly $97 billion combined for this year and last.

Another 314,400 jobs were saved this year thanks to the $80 billion in taxpayer lifelines extended to GM, Chrysler, and the GMAC and Chrysler Financial financing businesses, CAR said. The research organization based its conclusions on the potential impact of auto-industry collapse for jobs at U.S. auto makers and suppliers, and cascading effects on the economy at large. See more on CAR’s methodology here.

Government officials and former White House car czar Steve Rattner also have said they believed the auto bailouts were worth it for the jobs they saved and the financial toll spared to the swirl of businesses tied to the U.S. auto business.

This isn’t a universally held view. A late August poll by the Wall Street Journal and NBC News found 37% of respondents believed the GM and Chrysler bailouts “made things worse.” About one-third of people said the bailouts “made things better.” (The bank bailouts were less popular, according to the poll.)

At the rough pricetag of $80 billion in government assistance, each job CAR said was saved during the last two years cost taxpayers nearly $57,000.

But on the eve of General Motors’ wildly popular return to public markets, CAR figures Washington only needs to recoup $38 billion more on the taxpayer bailouts to “achieve a two-year break-even.” Put another way, if the Treasury recovers 57 cents on the dollar or more in IPOs of GM and Chrysler, “the public will have been made full whole,” CAR concluded.

Full article at link.

[PHAT-JAY]

It seems that all the good things that happened because of the bailout never get mentioned....all people do is complain about the government doing what had to be done, whether is it was Obama, Bush, who ever....1 Million jobs saved....thats at least a good thing. I hope people feel the same...and if the IPO does great and the government gets back their investment I wonder what they will have to complain about then...

[Aprime]

You still can't even prove the jobs would have been lost, nor that people wouldn't have got new jobs. It's been established time and time again that Kanysian economics don't work and even if GM's bailout+restructuration (needed) two punch combo was a success, it can mean Ch.11 the normal way may have lead to the people who would be willing to buy stock now to invest in the company while it was in the process or after. The market solutions to the problem of the GM/Chrysler bankruptcy weren't inexistant. Regardless, this is short term thinking still, Chrysler had to be bailed out twice (nobody cares about the Daimler rape, a fact's a fact) and who knows about the future. And that money the gov't spend to bail em' out was money the market could've spent, but can't since the gov't used it to bailout part of an industry of big corporations who sleep in the same bed as politicians.

[fp115]

You still can't even prove the jobs would have been lost, nor that people wouldn't have got new jobs. It's been established time and time again that Kanysian economics don't work and even if GM's bailout+restructuration (needed) two punch combo was a success, it can mean Ch.11 the normal way may have lead to the people who would be willing to buy stock now to invest in the company while it was in the process or after. The market solutions to the problem of the GM/Chrysler bankruptcy weren't inexistant. Regardless, this is short term thinking still, Chrysler had to be bailed out twice (nobody cares about the Daimler rape, a fact's a fact) and who knows about the future. And that money the gov't spend to bail em' out was money the market could've spent, but can't since the gov't used it to bailout part of an industry of big corporations who sleep in the same bed as politicians.

Well its quite simple to prove all that. The jobs that would be lost are all those affects by GM and Chrysler. That includes its suppliers and dealers.

As for being able to find jobs. That is highly unlikely. Job market shrinking can't create new jobs if there is nothing for them to do. If there are billions of dollars lost and thousands of companies shutting down, you won't have new companies pop up to take the slack. At least not for a decade.

[Aprime]

Well its quite simple to prove all that. The jobs that would be lost are all those affects by GM and Chrysler. That includes its suppliers and dealers.

As for being able to find jobs. That is highly unlikely. Job market shrinking can't create new jobs if there is nothing for them to do. If there are billions of dollars lost and thousands of companies shutting down, you won't have new companies pop up to take the slack. At least not for a decade.

Implying a million people would've been laid off because GM entered bankruptcy proceedings.

THE WORLD DOESN'T END WHEN YOU ENTER BANKRUPTCY. They did it (the difference being the gov't did all the dirty work), did everyone stop working for a month? Did all the suppliers collapse because they supposedly weren't getting paid? God damn.

[fp115]

Implying a million people would've been laid off because GM entered bankruptcy proceedings.

THE WORLD DOESN'T END WHEN YOU ENTER BANKRUPTCY. They did it (the difference being the gov't did all the dirty work), did everyone stop working for a month? Did all the suppliers collapse because they supposedly weren't getting paid? God damn.

No, the article says how the bridge loans helping GM remain solvent and not entering Chapter 7 saved millions of jobs. Chapter 11, without the loans would easily result in Chapter 7, due to the usual lengthy process of a chapter 11 proceeding, along with the huge lack of customer confidence. You would also have to keep in mind, that during that period, suppliers would not be getting paid and themselves accruing massive debt that would also cause them to close their doors.

The entire thing is a HUGE tangled web. If one thing goes down, the entire system goes down with it. It just so happened that most of GM's suppliers relied on the money they got from GM to stay in business, but they also supplied Toyota, Ford, Honda,... GM going out of business had the ability to shutter other car companies or severely affect their performance.

[lam]

Implying a million people would've been laid off because GM entered bankruptcy proceedings.

THE WORLD DOESN'T END WHEN YOU ENTER BANKRUPTCY. They did it (the difference being the gov't did all the dirty work), .

Since you like LARGE CAPS.....

THE COMPANY DOES END WITHOUT $Cash.

The company needed DIP Financing, that's where the North American Governments payed the big role.

GM AND Toyota both need to $11-$14 billion to operate.

With NO TARP,GM would have fell below the $11 billion mark, and therefore out of business.

And GM didn't exit bankruptcy the standard way.GM left in a pre-package 363 sale bankruptcy where General Motors Corporation sold select operations,and assets to General Motors Company free & clear of most liens.

In return General Motors Corporation was forgiven of nearly $34 billion of Secured Government loans, and recive 9.9 percent stake in General Motors Company......

Not a simple exit from bankruptcy.

[Aprime]

Since you like LARGE CAPS.....

THE COMPANY DOES END WITHOUT $Cash.

The company needed DIP Financing, that's where the North American Governments payed the big role.

GM AND Toyota both need to $11-$14 billion to operate.

With NO TARP,GM would have fell below the $11 billion mark, and therefore out of business.

And GM didn't exit bankruptcy the standard way.GM left in a pre-package 363 sale bankruptcy where General Motors Corporation sold select operations,and assets to General Motors Company free & clear of most liens.

In return General Motors Corporation was forgiven of nearly $34 billion of Secured Government loans, and recive 9.9 percent stake in General Motors Company......

Not a simple exit from bankruptcy.

Thanks I totally forgot I already mentioned the prepackaged bankruptcy, and knowing how other industries that went bankcrupt in Canada are doing their restructuring, assets would have been sold, UAW pensions would have taken a hit, and I could go on. The companies keep producing and most of the sold assets were 'revitalized', if not abandoned because they were net drains.

My step-dad was laid off for a bit - do you know what he did? He started a business, which is doing well. His plant was repurchased and he got his job back (he kept both occupations).


Keynesian economic policies make downturns longer, why are you trying to argue against economic literacy?

[Aprime]

No, the article says how the bridge loans helping GM remain solvent and not entering Chapter 7 saved millions of jobs. Chapter 11, without the loans would easily result in Chapter 7, due to the usual lengthy process of a chapter 11 proceeding, along with the huge lack of customer confidence. You would also have to keep in mind, that during that period, suppliers would not be getting paid and themselves accruing massive debt that would also cause them to close their doors.

The entire thing is a HUGE tangled web. If one thing goes down, the entire system goes down with it. It just so happened that most of GM's suppliers relied on the money they got from GM to stay in business, but they also supplied Toyota, Ford, Honda,... GM going out of business had the ability to shutter other car companies or severely affect their performance.

But here's the thing: we all know that the "bridge loans" aren't being repaid in full, successful IPO or not. So how many jobs has all that borrowing/debt cost the nation? Or what about all the whipped out liabilities? What about the former shareholders? Why is it that only the *GM* corporate entity is considered as a 'supporter of jobs' here?

Your second paragraph echoes the 'too big to fail' crap, so I won't bother.

[emh]

Keynesian economic policies make downturns longer, why are you trying to argue against economic literacy?

If I may borrow a phrase from your original post, you "can't even prove" this particular downturn (or any downturn for that matter) was lengthened due to bailouts. That's the beauty of arguing for hypotheticals, isn't it

Even if you believe Keynesian policies lengthen downturns, they do blunt the over-corrections typical during a bursting bubble. In other words, a "soft landing" is more likely.

[PhishPhood]

You still can't even prove the jobs would have been lost, nor that people wouldn't have got new jobs. It's been established time and time again that Kanysian economics don't work and even if GM's bailout+restructuration (needed) two punch combo was a success, it can mean Ch.11 the normal way may have lead to the people who would be willing to buy stock now to invest in the company while it was in the process or after. The market solutions to the problem of the GM/Chrysler bankruptcy weren't inexistant. Regardless, this is short term thinking still, Chrysler had to be bailed out twice (nobody cares about the Daimler rape, a fact's a fact) and who knows about the future. And that money the gov't spend to bail em' out was money the market could've spent, but can't since the gov't used it to bailout part of an industry of big corporations who sleep in the same bed as politicians.

Those against the bailouts have very convenient shortterm memories...or they simply were not paying attention when the ****-hit-the-fan. First it was Bush that threw GM/C the lifeline and from his memoir he said he did it because it was the right thing to do and he didn't want Obama to have to deal with totally cleaning up his mess.

To the point about saving jobs it's perfectlly clear that both Presidents saw what would happen if GM and C went under on Jan 2 2009. To say that 'oh well it's a big market and somebody would have stepped in and bought one or the other' ignores that at that time in our recent history the entire banking system of the world was flat on its back with prospects that the largest banks throughout the world wouldn''t make it. None were in any position to help out GM / C.

If the Feds hadn't stepped in and keep them above water then every one of those jobs, the subcontractors, the dealers, and everyone that relied on those incomes would have been DOA. 9.8% Unemployment now? What would that number look like if there were 1 - 2 million additional GM-related workers still looking for a job?

[PhishPhood]

Implying a million people would've been laid off because GM entered bankruptcy proceedings.

THE WORLD DOESN'T END WHEN YOU ENTER BANKRUPTCY. They did it (the difference being the gov't did all the dirty work), did everyone stop working for a month? Did all the suppliers collapse because they supposedly weren't getting paid? God damn.

Sorry you're simply wrong about the highlighted statement. Bankruptcy does end the company's life via liquidation if DIP financing is not available when the case if filed.

Again as noted several times above. In Dec 08 / Jan 09 there was NO DIP FINANCING AVAILABLE FROM ANY COMMERCIAL SOURCE IN THE WORLD. None, Nada, Zip. Every major commercial bank in the world was on death's doorstep themselves so they certainly weren't going to take any chances with two other nearly dead corpses laid at the feet of the US and Canadian governments.

[fp115]

But here's the thing: we all know that the "bridge loans" aren't being repaid in full, successful IPO or not. So how many jobs has all that borrowing/debt cost the nation? Or what about all the whipped out liabilities? What about the former shareholders? Why is it that only the *GM* corporate entity is considered as a 'supporter of jobs' here?

Your second paragraph echoes the 'too big to fail' crap, so I won't bother.

GM is not the only supporter of jobs. Rather, the mix between GM and Chrysler
does create millions of jobs. They both have thousands of jobs, but when you go down the entire chain, there is indeed over a million jobs on the line. There was never a "too big to fail" as you claim. It was, if they fail, everything fails with it. It would affect every automaker in North America in a very dramatic way. If that wasn't the case, then you should also begin to explain why suppliers got billions of dollars in loans as well as GM and Chrysler, to ensure the GM and Chrysler bankruptcies wouldn't make them fail, thus affecting the entire industry in a very severe way.

[joemac]

Aprime the key as point out was lack of DIP financing available from institutional banking sources, there wasn't any. People really underestimate the systemic effect. They underestimate what would have happen to those directly and indirectly tied to the auto industry. At such a perilous time the country needed to ask ourselves if a country of our economic power should have it's own domestic auto industry. It really comes down to that. Ford certainly would have been affected, how much or if they could have survived remains unknown thank goodness.

Take a listen of this very candid segment. http://finance.yahoo.com/video/cnbc-22844419/23070162

[63GrandSport001]

The whole problem with the idea of the Government not getting involved comes down to the frozen credit markets. They only BK filing GM would have been able to file on its own (Chrysler as well) was ch. 7 which would have been the end of the road for them.

Its also safe to say with unemployment where it is now that people who lost their jobs would have had a really hard time getting new ones. Even harder time getting a job that paid as much as what they lost and the amount of time to find a job is longer due to the economic conditions. Not only that but in many regions where jobs would have been lost has a lack of economic possibilities.

It was a risky move to bailout GM however one that if it didn't happen may have placed unemployment in the US around 11-12%. You really have to have been living under a rock since the end of 2007 to try to say the **** was not about to hit the fan.