Obama is lying to you about GM

The Obama administration, and its media backers, have seized upon news that General Motors made a $3.2 billion profit in the first quarter of 2011 as proof positive that its auto bailout is a success. President Obama is so buoyed that he is reportedly planning to make the bailout a major part of his reelection campaign. . .

For starters, included in the $3.2 billion figure is the net $1.5 billion that the company generated from the one-time sale of Delphi, its auto parts supplier, and Ally Financial, its financial arm. Subtract that, and its performance looks much less impressive, especially compared to its rival Ford that really didn’t receive a dime from taxpayers yet made $2.6 billion last quarter—or nearly a billion more than GM. . .

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.

The equity means two things: 1) GM has zero interest payments. Ford, by contrast, had to pay $251 million in debt-service costs. Despite this, GM’s real per vehicle margin was over $1,000 less than Ford’s, thanks to the heavy incentives it was forced to give buyers. 2) Taxpayers have no guaranteed return as they would have with a loan. Therefore, market valuation of GM’s stock will determine what they will recover. They got back $20 billion when the Treasury sold half of its equity when GM floated its first post-bankruptcy IPO in December. But that still leaves a $30 billion shortfall (excluding the $45 billion tax break). . . GM’s labor costs are still too high . . . But United Auto Workers President Bob King has declared that workers have already sacrificed enough to keep GM solvent and now expect givebacks.

General Motors will never repay taxpayers