[Allpar News System]

Last week, a a storm arose over a leaked document that said General Motors was going to pay CEO Dan Akerson over $11 million for his services in 2012. GM quickly refuted the leak, saying Akerson had specifically asked that his compensation remain the same as it was in 2011: $9 million, including a $1.7 million salary, stock grants, stock options and certain expenses. Akerson's actual take-home was about $11 million, but $2 million of that was gains from previously issued stock, so it really doesn't count. Since GM executive compensation is still subject to government oversight because the Treasury has not yet been repaid the billions of dollars loaned in 2009, various members of Congress, including Darryl Issa (R-CA), wanted to know why Akerson was making $9 million. On the other hand, GM has been very unhappy about the government's control, saying it makes the company uncompetitive in recruiting..

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[Erik Latranyi]

This belongs in Auto Industry News, not Mopar News.

 

[dfarc]

This belongs in Auto Industry News, not Mopar News.

I think it is here mainly for the last sentence;

"It’s also a point of pride for the people of Chrysler Group and their fans and supporters."

 

[MoparNorm]

It’s also a point of pride for the people of Chrysler Group and their fans and supporters.

Sadly, only a few handful, mostly from this board, know better. Most lump Chrysler in with GM, because both took the money and most erroneously believe that GM has paid back ALL it owes.

 

[Dave Z]

Three points of pride for us.

1 -- Chrysler has invested in actual product development and has dramatically increased the engineering force, while GM is cutting back.
2 -- the CEO continues to take a salary that is well below normal for his place, though he does let Fiat fill it in, so that's kind of a weak boast!
3 -- Chrysler has rebounded much more forcefully than GM -- admittedly GM fell much more in the end and less for the six years before that!

Of course GM can be proud that they are still independent and largely American-owned.

It was Bill's decision to have it autopost here and I support that because the focus appears to be GM but it is equally GM and Chrysler.

 

[TexasBill]

The reason I posted the article on Allpar instead of Acarplace and specifically in Chrysler news is the whole point was to show that Chrysler has produced the better results, in terms of creating a long-term healthy car company, while GM has focused too much on the money (especially executive compensation).

GM legally has paid back all it owes, or will have repaid it once the Treasury exits its GM stock position. It was able to do this by persuading Congress to accept stock instead of cash and investing a small portion of the money it received in an initial public offering. At this time, no one knows how much the taxpayers will lose, but it's almost certain to be in the billions of dollars. Combine this with the sham "repayment" in which GM used money it had squirreled away from the TARP funds to make a highly publicized payment on the loans and Dan Akerson standing up at the Detroit Auto Show and saying there was no new product because there was no money and one comes to the conclusion there are people with real brass balls in the Renaissance Center to have the nerve to complain about pay at all.

 

[MoparNorm]

GM legally has paid back all it owes, or will have repaid it once the Treasury exits its GM stock position. It was able to do this by persuading Congress to accept stock instead of cash and investing a small portion of the money it received in an initial public offering. At this time, no one knows how much the taxpayers will lose, but it's almost certain to be in the billions of dollars. Combine this with the sham "repayment" in which GM used money it had squirreled away from the TARP funds to make a highly publicized payment on the loans and Dan Akerson standing up at the Detroit Auto Show and saying there was no new product because there was no money and one comes to the conclusion there are people with real brass balls in the Renaissance Center to have the nerve to complain about pay at all.

I get the technicality, but most folks can see right through the "we paid it back sham", especially when the very next sentence contains, "taxpayers will lose"... Therefore, GM technically did not pay back the loans, legal is not the same as justice.

 

[jazz77]

GM legally has paid back all it owes, or will have repaid it once the Treasury exits its GM stock position. It was able to do this by persuading Congress to accept stock instead of cash and investing a small portion of the money it received in an initial public offering. At this time, no one knows how much the taxpayers will lose

I've read something in the neighborhood of $13 billion. I believe Chrysler's bailout was profitable.

 

[Dave Z]

Keeping in mind one has to separate the two parts -- the temporary loans, which are never being paid back but were intended to keep GM and Chrysler alive long enough to survive into 2008, and the bankruptcy loans.

Some people put the two together and by that standard Chrysler has not paid back.

I would argue if one intends to do that, perhaps one could go back to World War II and assign Chrysler the same profit margin enjoyed by Ford (on their domestic war effort, not their Nazi war effort). Convert to modern dollars, and I suspect the government owes Chrysler. but that's not the way people do it

 

[jimboy]

Dave, you have to stop confusing reality with politics, it will just get you in trouble!

 

[JRS200x]

I've read something in the neighborhood of $13 billion. I believe Chrysler's bailout was profitable.

Chrysler's bailout was not profitable. The gov't still lost money on the Chrysler bailout just nowhere near the degree they will on GM once the totals are tallied.

 

[MoparNorm]

Chrysler's bailout was not profitable. The gov't still lost money on the Chrysler bailout just nowhere near the degree they will on GM once the totals are tallied.

Exactly.
If you count GM's IPO price, the government lost about 35 cents on the dollar, for those shares. If you count the current GM stock price, the government lost about 50 cents on the dollar.
However if you include the cost for taxpayers to control the entire VEBA, the gov. May have saved billions, as long as the VEBA survives and the gov. Doesn't have to move in and take it over after all of the other money was spent in an attempt to keep the VEBA afloat.
That is still an unknown question as the UAW is having some serious issues trying to keep the unfunded liability under control, with higher expenses and lower income.
The bankruptcy for GM, may turn out to have been a temporary measure as little was done to change the fundamentals issues, addressing cost vs. the number of workers paying in.

 

[Erik Latranyi]

Chrysler's bailout was not profitable. The gov't still lost money on the Chrysler bailout just nowhere near the degree they will on GM once the totals are tallied.

This is Allpar. We deal in FACTS, even if they are uncomfortable.

New Chrysler refinanced its gov't loans through private lenders.

But old Chrysler Car Co still left taxpayers on the hook for about $2 billion (that is from memory, so the exact figure might be different)

The UAW, via the VEBA, owns a significant portion of Chrysler, in the form of stocks, but can force an IPO and divest itself in return for cash.

Exactly.
If you count GM's IPO price, the government lost about 35 cents on the dollar, for those shares. If you count the current GM stock price, the government lost about 50 cents on the dollar.
However if you include the cost for taxpayers to control the entire VEBA, the gov. May have saved billions, as long as the VEBA survives and the gov. Doesn't have to move in and take it over after all of the other money was spent in an attempt to keep the VEBA afloat.
That is still an unknown question as the UAW is having some serious issues trying to keep the unfunded liability under control, with higher expenses and lower income.
The bankruptcy for GM, may turn out to have been a temporary measure as little was done to change the fundamentals issues, addressing cost vs. the number of workers paying in.

Depending on the party in power, the VEBA may still be "bailed out" by taxpayers......as has been done for many other retirement plans.

 

[Jeepnut]

Chrysler's bailout was not profitable. The gov't still lost money on the Chrysler bailout just nowhere near the degree they will on GM once the totals are tallied.

If Chrysler hadnt refinanced the loans and carried them full term the US gubmnt would have made money on Chrysler!

 

[Erik Latranyi]

If Chrysler hadnt refinanced the loans and carried them full term the US gubmnt would have made money on Chrysler!

Yes, because the interest rates were set at outrageously high rates......similar to those that DC politicians criticize banks for charging!

 

[jazz77]

Loss on GM's bailout is estimated in 13 billion, loss on Chrysler's bailout was 1.3 billion
(Direct cash flows, if we were to estimate past and future indirect cash flows they would likely be both profitable).

http://money.cnn.com/2011/07/21/autos/chrysler_government_exit/index.htm

Of course GM is bigger than Chrysler but the difference remains pretty significant.

 

[Muther]

In terms of lost revenue and payouts, and damage to the economy, both bailouts were enormously successful. Had the bailouts NOT occured, and the government held its cash, the damage to the economy, and to tax revenue would have been immidiate, and very severe. Long term damage to the economy is harder to estimate, but all the experts agree it would be enormous.

The bailouts were (in way) like a drug dealers lending money to their users, so their users could keep buying drugs. In order to reap future tax money associated with the auto industry, the government had to make sure that the auto industry still existed. Even if the money wasn't paid back, it still would have been profitable for the government. I realize that very few people see things this way, but that doesn't change facts. That is why the industry was bailed out. To keep the government from having to pay hundreds of billions in short term money to out of work workers, and to be able to collect tens of trillions of dollars of future tax money. Yes, most of theose workers would have, eventually, found other jobs, and would have paid taxes on those incomes, but the lost revenue of a failed auto industry abolutely makes the bailouts appear microscopic by comparison.

 

[normtest]

Let's not forget the danger of a more severe collapse and the problems that would bring.

First, there would not be a single American supplier standing. Chrysler and GM both being allowed to fail would result in a few key, major suppliers also failing. That would stop Ford production, and don't think for a moment Ford wasn't sitting right on the edge, surviving on their $6 billion in low interest loans and the remains of a hefty credit line -- Mullaly's big bet. Ford would have come down within six months. You can only go so far on credit before collapsing, if you can't make new cars.

Once the pension guarantee funds ran out -- sometime in the first weeks -- the government would have massive, massive unemployment claims followed by welfare claims. Meanwhile company after company would be failing, from suppliers to dealers.

Toyota would allow some of its local subsidiaries to Chapter 11 as well, since they wouldn't be making anything without suppliers. Honda and the others would have their thousands of people on layoff.

Then dealerships across the country, once they'd sold the remainder of their sellable stock, at less than breakeven prices, would be failing and laying off.

Think Detroit's rough now? Or Toledo? Or Cleveland?

The repercussions would be huge. People were afraid when AIG started to fall, imagine the entire American auto industry.

 

[jimboy]

In terms of lost revenue and payouts, and damage to the economy, both bailouts were enormously successful. Had the bailouts NOT occured, and the government held its cash, the damage to the economy, and to tax revenue would have been immidiate, and very severe. Long term damage to the economy is harder to estimate, but all the experts agree it would be enormous.

The bailouts were (in way) like a drug dealers lending money to their users, so their users could keep buying drugs. In order to reap future tax money associated with the auto industry, the government had to make sure that the auto industry still existed. Even if the money wasn't paid back, it still would have been profitable for the government. I realize that very few people see things this way, but that doesn't change facts. That is why the industry was bailed out. To keep the government from having to pay hundreds of billions in short term money to out of work workers, and to be able to collect tens of trillions of dollars of future tax money. Yes, most of theose workers would have, eventually, found other jobs, and would have paid taxes on those incomes, but the lost revenue of a failed auto industry abolutely makes the bailouts appear microscopic by comparison.

Not to mention the retirement and health care costs the government would have had to assume.

 

[superduckie5000]

Health Care Costs ????

I Don't Think So.

TMD