GM Cut Autoworkers' Pay and Paid No Federal Income Tax After Receiving Taxpayer Bailout of $80 Billion; It Posted Its Highest Ever Profits in 2011

Bank of America, which received almost $1 trillion in tax-payer-provided 'bail out' funds, received a $1.9 billion tax-return in 2010. General Electric also paid no taxes in 2010; in fact, it took in over $4 billion in IRS refunds after raking in $26 billion in the year. Citigroup, another bailout recipient to the tune of $2.5 trillion, paid zero taxes in 2010. [Source]

Under the Troubled Asset Relief Program (TARP), the Treasury lent a large amount of money to GM. In bankruptcy, it then transformed the debt into stock. Neither Chrysler nor GM pay taxes. They are exempt for several years, costing taxpayers at least $42 billion. That was a decision Obama made (the regime gave any 'private' company a tax exemption). Including the tax breaks, how much will the total loss be to US taxpayers? This much: Government to LOSE $85 Billion on Government Motors, Obama calls it a success... The original bailout was $80 billion. Put up $80 billion, end up losing $85 billion. Only in the world of the federal government is that called a success. [Source]

Sixty billion dollars: that’s what this administration and the last one together sank into GM (not to mention another $20 billion or so they dumped into Chrysler). When President Obama gave GM this money, he insisted that it was not a handout but an “investment” that would cost taxpayers “not a dime.” But if there was ever any doubt that this wasn’t going to happen, this earning report dispels it. But cold, hard cash is not the only help that GM got. Usually when companies declare bankruptcy, their tax liabilities increase since they have no more losses to write off. But GM got Uncle Sam’s special bankruptcy package that allows it write off up to $45 billion of old losses going forward. That puts its total bailout at up to $75 billion. Even that’s not all. The Treasury gave GM $10 billion of the $60 billion as a loan; the rest was through the purchase of equity. (It has more or less paid back the loan.) The equity means two things: One, GM has zero interest payments, something that gives it a distinct advantage over competitors. [Source]

GM Posts Its Highest Profit Ever: $7.6 Billion

GM earns its highest profit ever in 2011 with $7.6 billion; overseas losses cut 4Q profit

February 19, 2012

AP- Just two years after it was rescued and reconstituted through bankruptcy and a government bailout, General Motors Co. cruised through 2011 to post the biggest profit in its history.

The 103-year-old company, leaner and smarter under new management, cut costs by taking advantage of its size around the globe. And its new products boosted sales so much that it has reclaimed the title of world's biggest automaker from Toyota.

GM may have a hard time breaking this record in 2012 because it is losing money in Europe and South America, and U.S. sales growth slowed in the last three months of 2011.

But the company's performance in North America and Asia still helped it earn $7.6 billion for the year, beating the record of $6.7 billion set during the truck boom in 1997.

The profit won't stop the debate about spending $49.5 billion in taxpayer dollars to save GM. But it did drive up the company's stock price, which could help the government get more of its money back.

The bailout of GM and Chrysler Group LLC, begun by George W. Bush and finished by Barack Obama, remains a major issue in this year's presidential campaign. It's so politically charged that even a Super Bowl ad celebrating Chrysler's rebirth caused arguments.

GM, which released its earnings Thursday, performed best in its home territory, posting a $7.2 billion pretax profit in North America. The numbers were so good that 47,500 blue-collar workers will get $7,000 profit-sharing checks, the maximum allowable under their new union contract. International Operations, which includes Asia, made $1.9 billion before taxes, but that was down from 2010.

GM's cost cuts, and its outlook for this year helped to push up the stock price by almost 9 percent to $27.08. The company said it trimmed costs by $500 million in the fourth quarter alone mainly by consolidating advertising agencies and engineering operations. A prediction that costs wouldn't rise this year wowed investors, especially since other automakers have forecast rising costs, said Itay Michaeli, an analyst for Citi Investment Research.

"That was a very pleasant surprise," he said.

GM also was optimistic about sales and revenue. It sees its global market share holding steady at 11.9 percent, and if global auto sales rise as expected this year, GM's slice of that would also increase.

That's especially promising, since GM managed to make money last year with industry-wide sales in the U.S. at a historically low 12.8 million. Sales this year could rise to 14 million.

The company expects to charge more for its cars and trucks this year, but warned that the prices could be pressured as the market shifts toward smaller, less-expensive vehicles.

CEO Dan Akerson hinted at a better year for GM in 2012, saying that the company will build on the 2011 results as it brings more new products into the market.

"The outlook here is quite favorable for earnings growth," said Citi's Michaeli. "They're keeping their costs really under control."

That's good news for the U.S. government, which still owns 26.5 percent of the company and needs more strong earnings to push up the stock price.

The government [taxpayers] owns 500 million shares of GM, which it got in exchange for the $49.5 billion bailout. Through earlier stock sales and loan repayments, the government has recouped about $22.3 billion of that money. The remaining shares would have to double in price and sell for around $53 for the government to get back the rest.

Despite the big annual profit and optimistic outlook, GM still lost $747 million before taxes in Europe last year, and its losses are expected to continue until a restructuring plan takes hold.

Akerson said GM will have to cut its European factory capacity to match lower sales. South America lost money, too: $122 million for the year. GM's fourth-quarter profit fell 8 percent, and its U.S. sales growth slowed in the quarter even as more Americans bought cars and trucks.

Also, GM's U.S. stockpile of cars and trucks is growing, and that could force it to offer discounts, especially in competitive market segments like pickup trucks and midsize cars. In January, GM's inventory was about 620,000, enough to supply its dealers for 89 days. That's up by more than 100,000 from a year earlier, when GM had a 68-day supply, according to Ward's AutoInfoBank.

Why a Millionaire Wants Autoworkers to Take a Pay Cut

December 16, 2011

Yahoo - The former head of the Obama administration's auto task force says he should have pushed the United Auto Workers for steeper sacrifices in the General Motors bailout, including wage cuts. The people earning $9 a hour in a suburban Detroit GM plant would disagree.

Former auto czar and wealthy Wall Street financier Steven Rattner told a luncheon in Detroit on Thursday:

That while the $50 billion GM bailout was successful, "we should have asked the UAW to do a bit more. We did not ask any UAW member to take a cut in their pay."

He also said that "friends on Wall Street" were concerned by GM's earnings and communications with the market, pushing the stock down to a level that would lose the government $14 billion if it sold its shares today.

Meanwhile, at General Motors' Orion Township, Mich., plant about 45 minutes away from where Rattner spoke, there are three tiers of hourly workers.

1. Roughly 900 workers at the top tier, the most senior UAW workers, make $29 an hour, a rate unchanged since 2008.
   
2. Another 500 or so UAW workers are paid about $16 an hour — a rate, adjusted for inflation, equal to the famed $5 a day Henry Ford started paying his workers in 1914.
3. And at the bottom scale are 200-odd workers technically employed by an outside supplier but who work in the plant moving parts to the assembly line, jobs once done by GM workers paid $29 an hour. The contractors' pay: $9 an hour with no health care, a rate which over a year's work would leave them below the poverty level for a family of four.

GM's contract with the UAW that convinced the company to move small-car production to Orion from South Korea allows it to shift such work to the outside supplier. That supplier has resisted UAW bargaining, and the tensions have grown high enough that UAW workers at the plant picketed earlier this month and sought approval from the union for a strike. (They delayed one planned picket so that President Obama could tour the plant with South Korea's president).

GM's North American arm posted operating profits of $5.7 billion in the past nine months, on which it will pay little to no federal income tax thanks to a law passed during the bailout preserving tax credits from the years when it bled money. The estimated savings to GM of its tiered wages at Orion: $112 per vehicle, on Chevy Sonics and Buick Veranos that start at $14,500, and can sell for $29,000. By GM's own stats, $29,000 is also the average annual wage of all GM hourly and salaried workers at Orion.

The UAW wants to move tier two workers up in the coming years, while all three Detroit automakers expect to expand the number of workers being paid the lower wage. Rattner's friends on Wall Street may want GM to cut deeper and answer their whims, but I don't see many of them embracing a life of poverty just to keep their jobs -- despite their far larger bailout.