29 February 2012

$18B Gift to GM - Shafting Ford, Taxpayers, Shareholders Continues

Shafting Ford, taxpayers, shareholders and bondholders continues as GM receives the gift of an until now unknown  $18 BILLION tax credit. Obama announced the biggest profit for GM in its 100-year-history? Lies continue as well. "GM back to old tricks," with Dealer inventories loaded  with an 89 day inventory, known as channel stuffing. 
Wall Street Journal: Corporations in the red, as GM was for years, are allowed to carry forward net operating losses that reduce their future tax liability when they are making money. GM had accumulated about $45 billion in such profit-shielding chits by 2008, with a book value of about $18 billion. When companies enter bankruptcy, carry-forwards disappear or are greatly limited under IRS section 382, which kicks in when ownership changes by more than 50 percentage points... 
So when GM entered bankruptcy in June 2009, the government swapped the debt the auto maker owed it
as a creditor for 61% of "new GM," while handing another chunk to the United Auto Workers. But new GM also inherited the accumulated net operating losses that would have turned into a pumpkin in normal bankruptcy. 
In a 2011 working paper, J. Mark Ramseyer of Harvard and Eric Rasmusen of Indiana University argue that by manipulating corporate tax rules by fiat, "Treasury gave the firm (and its owners, including the UAW) $18 billion more in assets." Thus a Democratic Administration gave "a massive tax benefit to one of the party's biggest supporters." The other problem is that the move put Ford and GM's other competitors at a disadvantage, as bailouts always do. Read more.
...we learn that in addition to car sales declining by 6% compared to a year ago, at 167,962 vehicles sold (of note: "Retail deliveries declined 15 percent compared with the same month a year ago and accounted for 70 percent of GM sales"), it was the all critical month end dealer inventory that caught our attention. 
And unfortunately as the skeptics expected, GM is back to its old tricks, as dealer inventories rose once again, this time by over 36k units, or the second highest in its post-reorg history, to a near record 619,455 vehicles stored with dealers. This is just the second highest ever in fresh start GM history, second only to November's 623,666. The January-end number represents 89 days supply, but more importantly the recent spike in restocking, which was seen with all other major car dealers, explains the ongoing "expansion" in the US economy as measured by indices such as the ISM.

With Obama boasting of GM's highest profits in it's 100-year-history, whatever the truth, we remind him that GM still owes taxpayers at least $25 BILLION, and there that's hidden $18 BILLION that even the Wall Street Journal missed for awhile. We haven't forgotten shareholders who lost everything - their share price, their retirement, their health insurance, maybe their homes, surely their peace of mind. Read about the autoworkers left behind here.

1 comment:

Matt said...

Well, as long as it "looks" good, and the MSM parrots it properly, what can go wrong?

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