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General Motors Loan Repayment was a Shell Game

May 2, 2010 By Chuck

Just two weeks ago General Motors (GM) announced that they had reimbursed the government (taxpayers) by paying back the balance of the TARP $6.7 Billion loan. General Motors even went on the air with the following television commercial:

But is General Motors being completely honest? Not according to Senator Charles Grassley, Republican of Iowa and Neil Barofsky, inspector general for the TARP. Essentially all that General Motors did was to use ‘other’ taxpayer funds held by the Treasury to pay off its original loan. This makes the claims that General Motors has repaid their debt to the American tax payers a tricky shell game.

In a letter sent to Secretary Tim Geithner on April 22, 2010 Senator Grassley had this to say:

Dear Secretary Geithner:

General Motors (GM) yesterday announced that it repaid its TARP loans. I am
concerned, however, that this announcement is not what it seems. In fact, it appears to be nothing more than an elaborate TARP money shuffle.

On Tuesday of this week, Mr. Neil Barofsky, the Special Inspector General for
TARP, testified before the Senate Finance Committee. During his testimony Mr.
Barofsky addressed GM’s recent debt repayment activity, and stated that the funds GM is using to repay its TARP debt are not coming from GM earnings. Instead, GM seems to be using TARP funds from an escrow account at Treasury to make the debt repayments.

The most recent quarterly report from the Office of the Special Inspector General for TARP says “The source of funds for these quarterly [debt] payments will be other TARP funds currently held in an escrow account.” See, Office of the Special Inspector General for TARP, Quarterly Report to Congress dated April 20, 2010, page 115.

Furthermore, Exhibit 99.1 of the Form 8K filed by GM with the SEC on
November 16, 2009, seems to confirm that the source of funds for GM’s debt repayments was a multi-billion dollar escrow account at Treasury—not from earnings […]

[…] Therefore, it is unclear how GM and the Administration could have accurately announced yesterday that GM repaid its TARP loans in any meaningful way. In reality, it looks like GM merely used one source of TARP funds to repay another. The taxpayers are still on the hook, and whether TARP funds are ultimately recovered depends entirely on the government’s ability to sell GM stock in the future. Treasury has merely exchanged a legal right to repayment for an uncertain hope of sharing in the future growth of GM. A debt-for-equity swap is not a repayment.[…] (Senate documents)

Furthermore, the Congressional Budget Office maintains their estimates that the American taxpayers in the end will lose approximately $30 Billion of the total General Motors bailout funds.

So did General Motors pay back the taxpayers? No, they just moved funds from one accountshell-game to another. General Motors, and the U.S. Treasury Department, have simply pulled a fast one on the American taxpayer with what appears to be nothing more than an old fashioned shell game.

Filed Under: Government, Market Updates Tagged With: , , , ,

Vehicle Sales for February 2010

March 4, 2010 By Chuck

Here is the tally of vehicle sales for February 2010 in the United States

Most data figures reference sales on a year over year basis (y/y).

TOYOTA

February US Vehicle Sales (y/y): -8.7% (100K units)

FORD

February US Vehicle Sales (y/y) +43.1%  (142.2K units)

- Total Truck and van sales +36.2% y/y to 46.2K units vs. +14.5% in Jan (39.7K units)
- F series pick-up sales +39.3% y/y to 32.9K units vs. +9.5% in Jan (27.6K units)

GENERAL MOTORS

February US Vehicle Sales +11.5% (142K units)

HONDA

February US Vehicle sales (y/y): +12.7%  (80.6K units)

NISSAN

February US Vehicle sales (y/y): +29% (70.2K units)

CHRYSLER

February y/y sales flat

HYUNDAI

February US vehicle sales 34.0K (no report on y/y change)

MERCEDEZ-BENZ

Reports February US Vehicle sales +8.4% y/y;  (15.3K units)

VOLKSWAGEN

Reports February US Sales +32.6% y/y; (18.K units)

AUDI

Reports February US sales +33% y/y; (6.2K units)

MITSUBISHI MOTORS

Reports February US sales down 1% m/m (4,019 units)

MAZDA

No report yet

More on this topic (What's this?)
More bad timing for Toyota (The Mess That Greenspan Made, 3/9/10)
Another Runaway Toyota (TM) Prius Adds To PR Nightmare (Green Stocks Central, 3/9/10)
Is Toyota a Bargain? (The Iconoclast Investor, 2/9/10)
Read more on Toyota Motor at Wikinvest
Filed Under: Market Updates, Vehicle Sales Data Tagged With: , , , , , ,

GDP Comes in at 5.7% and the Market Is Not Impressed

January 29, 2010 By Chuck

GDP comes in hot at a whopping 5.7% and the market was not impressed. And why should it be, a significant part of the GDP was nothing more than a huge inventory gain. It is my view that this GDP print is a ‘one hit wonder’. The stimulus money from the Government played a big role in goosing production which leads me to think of the old saying “hurry up and wait”, in this case a wait (and hope) that the gains in inventory are matched with future gains in sales which I still foresee as tepid for a considerable time to come.

Speaking of production, a report this afternoon off the wires is that General Motors is increasing production of large vehicles (SUV’s and trucks) and is reducing production of smaller fuel efficient cars. I guess General Motors has still not learned the lesson that drove them into bankruptcy in the first place.

A lot of bearish indications on the charts, which I will cover in detail in the weekend video. One particular chart that shows extensive damage is the Nasdaq.

Nasdaq 100 Chart

More later…

Filed Under: Market Updates Tagged With: , ,

Auto Sales In United States – Worst Year In Nearly Three Decades

January 5, 2010 By Chuck

Even with the the last minute surge in December of buyers taking advantage of numerous incentive programs, it was still not enough to prevent another record year of sales declines. The year 2009 saw an industry wide decline of 21.2% from the 2008 year and the worst total sales since 1982.

Everybody thought that 2008 was the bottom for auto sales, in 2008 record declines were met with hopes and renewed vigor that 2009 would see a stabilization and return to growth. Unfortunately those hopes were dashed today as the final tally of auto sales figures were added up and 2009 was even worse than 2008.

For General Motors, automobile sales in 2009 were 30% lower than in 2008. Chrysler sales were down 36% compared to the prior year which was also the worst sales performance for Chrysler since 1962.

At Ford it was a little bit better, but year over year sales figures still put the auto giant at lower sales than in 2008 with a drop of 15% from last year.

Had it not been for the Government ‘Cash for Clunkers’ program, sales for 2009 would have been significantly worse. Now that the program has ended, the real tell of how well the auto makers are able to do will come through. General Motors is predicting that 2010 will bring an industry sales figure of 11 to 12 million vehicles. To that I say “good luck’ at meeting those figures, that is unless another Government handout is coming.

In 2009 the industry wide sales figures came in at 10.4 million units, down 21.2% from sales in 2008.

Who did do well in 2009? Hyundai and Subaru reported 8% and 10% gains respectively as their vehicles were among the most popular during the ‘Cash for Clunkers’ program.

With the ‘Cash for Clunkers’ program now over, reports of delinquencies still rising, and the unemployment situation my estimate for the 2010 sales figures are for a year end tally of 9.5 to 10.5 million units, much lower than forecast by General Motors and other economists.

More on this topic (What's this?)
Bankrupt GM uses $3.5 billion of taxpayers’ money to buy subprime auto lender AmeriCredit and s... (naked capitalism, 7/22/10)
GMAC Joins the Black Hole Club (naked capitalism, 10/27/09)
Cash for Clunkers Hangover (Expected Returns, 10/2/09)
Read more on Auto Makers at Wikinvest
Filed Under: Market Updates Tagged With: , , ,

Tax Payers Lose Again – General Motors & Chrysler

December 8, 2009 By Chuck

Remember the nearly $85 billion of “YOUR” money that was given to General Motors and Chrysler to rescue them from themselves? Yea, that $85 billion. Tax payers awoke one morning and discovered that they owned two car companies that unfortunately has since the mid 1980′s produced poorly designed and manufactured vehicles. It did not matter if you wanted to be part owner of a car company, but you are. And you are also taking a loss on “YOUR” investment.

Washington — The Obama administration will tell Congress Wednesday that it expects to lose about $30 billion of the $82 billion government bailout of the auto industry, two administration officials familiar with the report said today.

The estimate — the first public accounting of losses connected to the rescue of General Motors and Chrysler — is in line with what the Government Accountability Office, the Troubled Asset Relief Congressional Oversight Panel and former auto czar Steve Rattner have suggested. (Source: Detroit News)

While $30 Billion is slightly less than a previous estimate, it is still a loss of 37% of your money and you didn’t even ask to be invested in it to begin with.

More on this topic (What's this?)
GMAC Joins the Black Hole Club (naked capitalism, 10/27/09)
GMAC has been nationalized (naked capitalism, 10/29/09)
Super-sized 'McMansions' Meet Reality (Wealth Daily, 8/19/10)
Read more on General Motors, Chrysler at Wikinvest
Filed Under: Market Updates Tagged With: , ,

Saturn Cars To Disappear Forever

September 30, 2009 By Chuck

saturn logo… unless there is a last minute buyer.

The breaking news this afternoon is that General Motors attempts to sell the Saturn brand vehicles has failed abruptly when Penske Automotive called off the deal today. General Motors has confirmed that talks have fallen apart and will now ‘wind down’ the entire Saturn name.

This will mean that all production of Saturn vehicles will end very soon and all dealerships in the United States will have to close.

Penske Auto Group (Name/Ticker Changed from UAG (United Auto Group) on 7/2). *PENSKE AUTOMOTIVE TERMINATES DISCUSSIONS WITH GENERAL MOTORS TO ACQUIRE SATURN; GM to wind down Saturn Brand and dealership network.

- Citing concerns directly related to the future supply of vehicles beyond the supply period it had negotiated with GM.
- Since announcing its discussions with GM on June 5, 2009, the company has been in the due diligence process to determine the feasibility of developing an independent distribution model for Saturn-branded products and service parts in the United States, including the sourcing of vehicles from GM and other potential suppliers. The company had negotiated a definitive agreement with GM to source vehicles on a contract-manufactured basis for a period of time. After this period, the company would have been required to source vehicles from another third party under a similar contract-manufacturing agreement.
With no contract from Penske to manufacturer Saturn cars it will require General Motors to close additional plants and layoff more employees. And the employees of all the Saturn dealers will soon be on the unemployment lines.
Will someone else step forward to purchase the Saturn name? If they are smart they won’t.
More on this topic (What's this?)
Could Goldman Sachs Share GM’s Fate? (Contrarian Profits, 10/1/09)
GMAC Joins the Black Hole Club (naked capitalism, 10/27/09)
GMAC has been nationalized (naked capitalism, 10/29/09)
Read more on General Motors, Penske Auto Group at Wikinvest
Filed Under: Market Updates Tagged With: , ,

The GM insanity…. + 36 % for worthless paper!

July 10, 2009 By Chuck

Chuck had already talked about the subject here. But apparently the message is not passing through.

GM (GMGMQ.PK) the delisted stock of the “old” GM is currently trading as a pink sheet and is experiencing extreme price variations for a stock that is worthless. The “Q” indicates the company is in bankruptcy proceedings.

Today for instance its price rose by 36 %!

Chuck mentioned something about people jumping on board based on scam feeders, but I was hugely surprised to see an article published on Seekingalpha that basically maintains this huge confusion by launching the article in this style:

It may take awhile to convince car buyers, but General Motors (GMGMQ.PK) has emerged from bankruptcy with better prospects for a profitable future than virtually any of the automaker’s critics predicted a few months ago. Here’s why:

Mentioning the stock ticker and not warning in any place in the article that the current stock is worthless is a huge negligence… How many poor investors are going to be skinned in believing that this stock really is the “new” GM?

The fact was even compounded by the fact that today it was announced that GM just “exited chapter 11″. The WSJ had buried very far down in its lead article this important information (emphasis added):

Though the new GM will not be a publicly traded company initially, Mr. Henderson stressed that GM will remain transparent in its financial reporting.

The confusion between the “new” GM and the stock traded is thus being unfortunately maintained for the man on the street without sufficient legal or financial knowledge.

Lack  of knowledge about the elementary mechanisms of bankruptcy does the rest and pulls many innocent investors into a deadly trap, allowing swindlers of all sorts to make a profit on their backs.

There is a serious issue with the US stock market authorities that allow the equity of bankrupt companies to be traded even after chapter 11 proceedings are begun.

Even Jim Cramer was yelling today on CNBC in his typical bombastic style about the nonesense of continuing to list GM’s stock…

So, I’ll add in my little stone: avoid trading GMGMQ.PK!

This stock is destined to be definitely delisted and will wipe out any equity. Even after bankruptcy, GM emerges with 48 BN USD in debt.

For more info on what is a bankruptcy in the US legal system check out Investopedia.

Filed Under: Market Updates Tagged With:

Auto Suppliers Want More Funds

April 14, 2009 By Chuck

Auto suppliers are preparing to make another trip to your wallet. Auto suppliers are preparing to ask the U.S. Government (tax payers) for additional aid.

I guess we will begin to see auto parts manufacturers filing to become ‘bank holding companies’ so they can have a direct line to the tax payers (sarcasm intended).

US car parts suppliers are preparing to ask for more government aid, including incentives to encourage fresh private-equity investment in the sector.

The suppliers are also seeking access to the Treasury Department’s term asset-backed securities loan facility (Talf) and similar loans provided by the Small Business Administration.

The Treasury last month approved up to $5bn in government-backed credit insurance for suppliers to General Motors and Chrysler, the two carmakers being kept afloat by Washington.

Suppliers can also raise cash by selling receivables to the scheme at a discount.

But Neil De Koker, president of the Original Equipment Suppliers Association, said “there isn’t enough money in the programme to take care of all the suppliers. Many, many suppliers are still desperate”.[...]

[...]Delphi, which is GM’s biggest supplier and has been in bankruptcy protection since late 2005, has warned that shareholders are likely to recover nothing from its restructuring.

Source: Financial Times

Filed Under: Market Updates Tagged With: , , ,
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