7 ms·

I'm glad we bailed them out so they could wildly speculate on tech startups.

by tbrock 11y ago

matthewmacleod 11y ago
This is not a valuable contribution to any discussion. GM should be developing their business, in part to ensure they don't end up in a situation where they are stagnant and need bailed out again. Investment in startups in the same industry is a sensible approach to this.
pc86 11y ago
Well they've paid back the money already (as of 2010 or so?) so I'm not sure that's totally relevant to what they're doing now.
- spoiledtechie 11y ago
  Not really, what your speaking of isn't entirely accurate. http://business.time.com/2013/12/17/gm-ceo-were-not-paying-any-more-back-to-government/ http://business.time.com/2013/12/17/gm-ceo-were-not-paying-a...
  - pc86 11y ago
    You're talking about the delta in share value. The money they took was paid back.[0] They are two completely different things. > Q: Did General Motors repay its TARP loan from the Treasury with other TARP money? > A: Yes. GM repaid the loan portion of the automaker bailout ahead of schedule, with interest. The article you cite seems to suggest that the government should have had some sort of guarantee from GM that the gov't would be able to sell shares back for no less than what they paid for them. I don't think any such promise was ever made. > taxpayers are still stuck with GM stock that isn’t worth what was paid for it. [0] http://www.factcheck.org/2010/05/general-motors-debt/ http://www.factcheck.org/2010/05/general-motors-debt/
jegutman 11y ago
This might be a bit technical, but the company that received a bailout went through bankruptcy and re-structuring. https://en.wikipedia.org/wiki/General_Motors_Chapter_11_reorganization https://en.wikipedia.org/wiki/General_Motors_Chapter_11_reor... So they didn't get a bailout that they are now using to "wildly speculate on tech startups" because all that capital has been restructured. Many companies did get bailed out in a market where raising capital was near impossible and as a result recovered and are involved in investing in tech companies both equity and debt. Although I'm guessing your particular objection here is that they're a non-financial company and it doesn't seem to be part of their core business?
- kbenson 11y ago
  > I'm guessing your particular objection here is that they're a non-financial company and it doesn't seem to be part of their core business? Although I'm pretty sure every major automaker is also a financial company, and has been for quite a while. All those special 0% down or cash back deals don't come from the dealer.
  - adevine 11y ago
    GM's financial arm was GMAC, which, while bailed out during the financial crises, eventually rebranded and IPO'ed as Ally Financial. The US Treasury made a ~ $2.4 billion profit on a $17.2 billion investment: https://www.treasury.gov/press-center/press-releases/Pages/jl9727.aspx https://www.treasury.gov/press-center/press-releases/Pages/j...
    - aaardvark 11y ago
      On a risk-adjusted basis, that's a pretty mediocre return.
      - kbenson 11y ago
        Considering the profit was at most a secondary goal of the investment, I wouldn't consider it bad at all.
tinkerrr 11y ago
So you're saying a stagnant company in a stagnant industry that almost died should remain stagnant and not try anything risky at all? It's not wild speculation for GM. They most likely have ways to work together. It's unlikely a completely passive investment.
- tonyedgecombe 11y ago
  It should have been allowed to fail, propping it up is unfair competition against its stronger competitors.
- bendykstra 11y ago
  GM has good reason to make risky decisions, since the taxpayers will likely be asked to support the company a second time if it runs into trouble. As a taxpayer, I would like them to be as safe and stagnant as possible, but I have no say in the matter. This is the moral hazard created by the bailout.
  - ssmoot 11y ago
    Ford was in bad shape in 2006. Does anyone even remember the Ford of 2006? With their awful Focus when everyone was clamoring for the euro version? Or the Ford 500? They didn't avoid a "bailout" because they were a strong company. Two years earlier they mortgaged everything (including the iconic blue-oval logo) while money was still cheap. It was pure luck. Not strength or some sort of moral superiority. So by the time the crash rolled arounds and GM and Chrysler couldn't do the same, Ford had already secured over $25 billion in funding, with another $5 billion in government loans to refresh some factories to produce greener cars. I'm not trying to argue GM or Chrysler did or didn't "deserve" a bailout. It's just a pet peeve of mine that there's this revisionist aura around Ford these days. They sold Jaguar and Land Rover to Tata for $2.3B, about half what they paid, and significantly less than they've made since. They sold Aston Martin for about $1B (well, that one was probably not a bad idea at least). They also sold Volvo for another $1.5B. They liquidated their stake in Mazda to the tune of about $500M dollars. Discounting the F-series, Ford easily had the worst portfolio, and were in trouble years before the others. They sold off several brands at a significant loss for some quick cash. Not all of those were smart moves in hindsight and they lost their shirts on most. While Ford has taken government assistance, they've milked their amazing ability to avoid TARP by failing before everyone else for all it's worth. Will they be as lucky next time? What are they going to put into a $10B fire-sell next time? And will they be lucky enough next time to secure $25B in loans while the market money is still flowing? Will the government be handing out $5B loans to modernize factories? I guess time will tell, but I felt like the conversation could use a little balance.
mmanfrin 11y ago
Yep because bailing out a capstone company buttressing up an enormous cottage industry of parts makers was such a bad idea.
tomasien 11y ago
The bailout was massively profitable for the government and every penny has been repaid. Investing in innovation is exactly what a company like GM should be doing and our tax dollars are in no way involved in this. Edit: didn't make money on GM http://www.reuters.com/article/us-autos-gm-treasury-idUSBREA3T0MR20140430 http://www.reuters.com/article/us-autos-gm-treasury-idUSBREA... Made lots of money overall: http://www.nytimes.com/2014/12/20/business/us-signals-end-of-bailouts-of-automakers-and-wall-street.html?_r=0 http://www.nytimes.com/2014/12/20/business/us-signals-end-of...
- mangeletti 11y ago
  This is entirely untrue, pertaining GM. We tax payers lost tremendous money on GM[1], and then GM restructured (think "good bank bad bank"[2] style nonsense) in a clever way to ensure that we would never reap the benefits of the future success of "GM". 1. http://www.reuters.com/article/us-autos-gm-treasury-idUSBREA3T0MR20140430 http://www.reuters.com/article/us-autos-gm-treasury-idUSBREA... 2. https://en.wikipedia.org/wiki/Bad_bank https://en.wikipedia.org/wiki/Bad_bank
  - tomasien 11y ago
    Good point! Very good point - I still think investing in innovation is the only thing that makes sense for GM, the reason the auto bailout worked out is because Ford*, for example, did and is crushing it. http://www.nytimes.com/2014/12/20/business/us-signals-end-of-bailouts-of-automakers-and-wall-street.html?_r=0 http://www.nytimes.com/2014/12/20/business/us-signals-end-of... Edit: Ford did not take bailout money so that logically does not hold like I thought it did. Point about innovating still holds fine.
    - j2bax 11y ago
      I was under the impression that Ford was the only one that didn't take a bailout.
      - wavefunction 11y ago

I'm glad we bailed them out so they could wildly speculate on tech startups.

by tbrock 11y ago

I'm glad we bailed them out so they could wildly speculate on tech startups.

This is not a valuable contribution to any discussion. GM should be developing their business, in part to ensure they don't end up in a situation where they are stagnant and need bailed out again. Investment in startups in the same industry is a sensible approach to this.

pc86 11y ago

Well they've paid back the money already (as of 2010 or so?) so I'm not sure that's totally relevant to what they're doing now.

spoiledtechie 11y ago
Not really, what your speaking of isn't entirely accurate. http://business.time.com/2013/12/17/gm-ceo-were-not-paying-any-more-back-to-government/ http://business.time.com/2013/12/17/gm-ceo-were-not-paying-a...
- pc86 11y ago
  You're talking about the delta in share value. The money they took was paid back.[0] They are two completely different things. > Q: Did General Motors repay its TARP loan from the Treasury with other TARP money? > A: Yes. GM repaid the loan portion of the automaker bailout ahead of schedule, with interest. The article you cite seems to suggest that the government should have had some sort of guarantee from GM that the gov't would be able to sell shares back for no less than what they paid for them. I don't think any such promise was ever made. > taxpayers are still stuck with GM stock that isn’t worth what was paid for it. [0] http://www.factcheck.org/2010/05/general-motors-debt/ http://www.factcheck.org/2010/05/general-motors-debt/

jegutman 11y ago

This might be a bit technical, but the company that received a bailout went through bankruptcy and re-structuring. https://en.wikipedia.org/wiki/General_Motors_Chapter_11_reorganization https://en.wikipedia.org/wiki/General_Motors_Chapter_11_reor... So they didn't get a bailout that they are now using to "wildly speculate on tech startups" because all that capital has been restructured. Many companies did get bailed out in a market where raising capital was near impossible and as a result recovered and are involved in investing in tech companies both equity and debt. Although I'm guessing your particular objection here is that they're a non-financial company and it doesn't seem to be part of their core business?

kbenson 11y ago
> I'm guessing your particular objection here is that they're a non-financial company and it doesn't seem to be part of their core business? Although I'm pretty sure every major automaker is also a financial company, and has been for quite a while. All those special 0% down or cash back deals don't come from the dealer.
- adevine 11y ago
  GM's financial arm was GMAC, which, while bailed out during the financial crises, eventually rebranded and IPO'ed as Ally Financial. The US Treasury made a ~ $2.4 billion profit on a $17.2 billion investment: https://www.treasury.gov/press-center/press-releases/Pages/jl9727.aspx https://www.treasury.gov/press-center/press-releases/Pages/j...
  - aaardvark 11y ago
    On a risk-adjusted basis, that's a pretty mediocre return.
    - kbenson 11y ago
      Considering the profit was at most a secondary goal of the investment, I wouldn't consider it bad at all.

tinkerrr 11y ago

So you're saying a stagnant company in a stagnant industry that almost died should remain stagnant and not try anything risky at all? It's not wild speculation for GM. They most likely have ways to work together. It's unlikely a completely passive investment.

tonyedgecombe 11y ago
It should have been allowed to fail, propping it up is unfair competition against its stronger competitors.
bendykstra 11y ago
GM has good reason to make risky decisions, since the taxpayers will likely be asked to support the company a second time if it runs into trouble. As a taxpayer, I would like them to be as safe and stagnant as possible, but I have no say in the matter. This is the moral hazard created by the bailout.
- ssmoot 11y ago
  Ford was in bad shape in 2006. Does anyone even remember the Ford of 2006? With their awful Focus when everyone was clamoring for the euro version? Or the Ford 500? They didn't avoid a "bailout" because they were a strong company. Two years earlier they mortgaged everything (including the iconic blue-oval logo) while money was still cheap. It was pure luck. Not strength or some sort of moral superiority. So by the time the crash rolled arounds and GM and Chrysler couldn't do the same, Ford had already secured over $25 billion in funding, with another $5 billion in government loans to refresh some factories to produce greener cars. I'm not trying to argue GM or Chrysler did or didn't "deserve" a bailout. It's just a pet peeve of mine that there's this revisionist aura around Ford these days. They sold Jaguar and Land Rover to Tata for $2.3B, about half what they paid, and significantly less than they've made since. They sold Aston Martin for about $1B (well, that one was probably not a bad idea at least). They also sold Volvo for another $1.5B. They liquidated their stake in Mazda to the tune of about $500M dollars. Discounting the F-series, Ford easily had the worst portfolio, and were in trouble years before the others. They sold off several brands at a significant loss for some quick cash. Not all of those were smart moves in hindsight and they lost their shirts on most. While Ford has taken government assistance, they've milked their amazing ability to avoid TARP by failing before everyone else for all it's worth. Will they be as lucky next time? What are they going to put into a $10B fire-sell next time? And will they be lucky enough next time to secure $25B in loans while the market money is still flowing? Will the government be handing out $5B loans to modernize factories? I guess time will tell, but I felt like the conversation could use a little balance.

mmanfrin 11y ago

Yep because bailing out a capstone company buttressing up an enormous cottage industry of parts makers was such a bad idea.

tomasien 11y ago

The bailout was massively profitable for the government and every penny has been repaid. Investing in innovation is exactly what a company like GM should be doing and our tax dollars are in no way involved in this. Edit: didn't make money on GM http://www.reuters.com/article/us-autos-gm-treasury-idUSBREA3T0MR20140430 http://www.reuters.com/article/us-autos-gm-treasury-idUSBREA... Made lots of money overall: http://www.nytimes.com/2014/12/20/business/us-signals-end-of-bailouts-of-automakers-and-wall-street.html?_r=0 http://www.nytimes.com/2014/12/20/business/us-signals-end-of...

mangeletti 11y ago
This is entirely untrue, pertaining GM. We tax payers lost tremendous money on GM[1], and then GM restructured (think "good bank bad bank"[2] style nonsense) in a clever way to ensure that we would never reap the benefits of the future success of "GM". 1. http://www.reuters.com/article/us-autos-gm-treasury-idUSBREA3T0MR20140430 http://www.reuters.com/article/us-autos-gm-treasury-idUSBREA... 2. https://en.wikipedia.org/wiki/Bad_bank https://en.wikipedia.org/wiki/Bad_bank
- tomasien 11y ago
  Good point! Very good point - I still think investing in innovation is the only thing that makes sense for GM, the reason the auto bailout worked out is because Ford*, for example, did and is crushing it. http://www.nytimes.com/2014/12/20/business/us-signals-end-of-bailouts-of-automakers-and-wall-street.html?_r=0 http://www.nytimes.com/2014/12/20/business/us-signals-end-of... Edit: Ford did not take bailout money so that logically does not hold like I thought it did. Point about innovating still holds fine.
  - j2bax 11y ago
    I was under the impression that Ford was the only one that didn't take a bailout.
    - wavefunction 11y ago