There’s been a lot of good news coming out of federally-owned General Motors (GM) lately, which you should pay attention to since you, the American taxpayer, are the majority shareholder in this company whether you wanted to be or not. I’m still searching for the clause in the Constitution that authorized this, by the way . . . I’ll let you know as soon as I find it.
So, the good news from Detroit: First, GM announced last month that it was going to pay off its entire $5.8 billion in government loans. Then, this month, the company announced its first quarterly profit since 2007. Awesome!
The problem is that it’s all a lie. That’s not a word I use lightly, but it’s the only one that really describes what’s happening here. It’s like a home listing in a newspaper showing a picture of the front porch of a lovely house, without revealing that—just out of frame—the vast majority of the house is a burned-out shell. What do you find when you look behind the curtain?
First off, let’s talk about that $5.8 billion loan payoff. You may be wondering where GM found $5.8 billion so soon after its bankruptcy. It found it in a $16.4 billion escrow account set up by the U.S. and Canadian governments during a different round of bailouts. Yes, GM paid off a loan from the government using money given to it by the government. It’s like using one credit card to pay off another; you haven’t actually done anything to reduce your debt. In reality, the government forgave a loan it made to GM (i.e., it will never see that money again) and then used some funny math and PR spin to make it look like a payoff.
When GM says it’s returned all the money you, the taxpayer, put into it, the company is lying. We’ve invested over 50 billion dollars of our tax dollars in GM for some idiotic reason; they’ve managed to use some funny math to erase a whopping $5.8 billion of it. Even if you accept the funny math (which I don’t), that would still leave $44.2 billion outstanding.
Now, let’s talk about this quarterly profit. I don’t want to know if GM made a profit, I want to know if GM andcombined made a profit. We seem to have a short memory; when GM went bankrupt in 2009, the company was split into two. President Barack Obama (D) referred to these as ‘good’ GM and, well, tried not to mention the other one. ‘Good’ GM got the brands and products that seemed to be worth saving, while everything else (and a lot of debt) went to ‘bad’ GM.
Technically, the original General Motors Corporation of old is ‘bad’ GM and was renamed to Motors Liquidation Company, and retains all the debts and mess it created. A new corporation was created out of thin air, and the ‘good’ assets and brands were sold to it (and bought with mostly federal tax dollars). This new corporation was then renamed to General Motors Corporation and is pretending to be the same GM as the old one (essentially). Got it?
What matters though is that, when you talk about ‘GM’ (meaning the giant car company that went bankrupt in 2009), you are really talking about two companies that took its place following its bankruptcy. We are shareholders in ‘good’ GM, but that doesn’t mean we shouldn’t pay attention to ‘bad’ GM. Motors Liquidation Company is part of this mess we’ve bought ourselves into. How is it doing? Has it sold off its assets? Has it paid off its debts?
Why should we care? The whole idea was to get rid of that old, ‘bad’ GM, right? Well, yes, but it is disingenuous to talk about GM making a profit when the ‘real’ GM is still in debt up to its corporate eyeballs and inching its way through liquidation. The 50 billion dollars we’ve put into the GM didn’t really fix GM, it just moved the problems around. Maybe it saved GM as an operating concern, and maybe the [new] company will one day return to its former glory, but the [old] company still owes a lot of people a lot of money. It still seems to be a drain on our economy, not a boon to it.
All in all, we’re [reluctant] shareholders here and we have to do our due-diligence with regard to the company we own. Look behind the curtain at what’s really going on, and you’ll find that GM’s reality isn’t all rainbows and butterflies. Even the ‘good’ GM is just barely scraping by with a small profit on our billions of ‘invested’ tax dollars that we’ll probably never see again, lying to us about whether it has paid back what it owes us, and pretending its evil twin Motors Liquidation Company doesn’t exist. Don’t believe the hype.