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GM Hits New Low, Taxpayer Losses at $34Billion

Obama’s famed auto-bailout centerpiece, General Motors, is become worth less every day as its Monday close bottomed at $19.57 – the lowest in 2012.

GM went public in November of 2010 after being rescued by American taxpayers and the stripping of private investors. The initial offering started at $33 and things have fallen off a cliff since then. As Investors.com reports, American taxpayers are watching their investment dwindle:

Normally you might say, tough luck investors. But this is Government Motors. The Treasury still owns 26.5% of GM, or 500 million shares. Taxpayers are still out $26.4 billion in direct aid. Shares would have to hit $53 for the government to break even.

Those shares were worth about $9.8 billion as of Monday. That would leave taxpayers with a loss of $16.6 billion.

But that’s not the full tally. Obama let GM keep $45 billion in past losses to offset future profits. Those are usually wiped out or slashed, along with debts, in bankruptcy. But the administration essentially gifted $45 billion in write-offs (book value $18 billion) to GM. So when GM earned a $7.6 billion profit in 2011 (more on that below), it paid no taxes.

The risk is also somewhat shared by the United Auto Workers ((UAW). The healthcare benefits plan had to take 10.1% ownership in GM through stock in order to offset cash payments owed by the automaker to the trust. As the value of that stock declines, so does the amount of potential capital in the healthcare trust. The trust is an obligation of GM and as the value of the stock drops the cash requirement goes up. How long until GM can’t pay its obligations.. again?

The failing Opel unit, Volt fires, Cruze call-backs, and slipping market share are all anchors around the neck of GM and the taxpayers that bailed out the auto company that should have gone into traditional bankruptcy.

The losses aren’t realized as the Treasury hasn’t attempted to sell the stock and isn’t likely to before the election to avoid giving Republicans such an easy target.

 

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