GM Collapse Would Cost U.S. Taxpayers Up to $200 Billion, More Than Rescue

[Purveyor]

Source: Bloomberg

By Alex Ortolani and Mike Ramsey

Nov. 14 (Bloomberg) -- General Motors Corp., seeking a federal bailout as its cash dwindles, would cost the government as much as $200 billion should the biggest U.S. automaker be forced to liquidate, a forecasting firm estimated.

A GM collapse would mean ``more aid to specific states like Michigan, Ohio, and Indiana, and more money into unemployment and extended benefits,'' Nariman Behravesh, chief economist at IHS Global Insight Inc. in Lexington, Massachusetts, said today in an interview. He prepared the estimate for Bloomberg News.

The projected expense of $100 billion to $200 billion covers funds for existing programs, such as unemployment insurance, and new measures that would be needed to revive economic growth after millions of auto-related job losses.

Such a sum would be an eightfold increase over the $25 billion bailout package that will be debated in Congress next week to help prop up Detroit-based GM, Ford Motor Co. and Chrysler LLC amid the industry's worst sales year since 1991.

A GM shutdown would cost jobs among suppliers as well as at the automaker itself, pushing the U.S. unemployment rate next year to 9.5 percent, compared with current projections of as high as 8.5 percent due to the weakened economy, Behravesh said.

Read more: http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=ad09qxbiElB8

[Jack Bone]

1. K&R

[mikeiddy]

2. Too big to fail = Too big to be allowed

I think now may be the time to come up with ways to prevent future mega mergers and conglomerations. I think we would be ar better off with 10, 20 or 100 auto companies than with 3 we have. I think we would be far better off with lots of small to large size banks than with 3 mega banks. Ditto with accounting, legal, retail and on and on. The rush for size has done far more harm than good overall, especially now with all of the big firms lining up for bailouts.

[Donnachaidh]

we had monopoly laws

We need to start sytematically applying them to EVERY business claiming it's too big to fail. You want money -- you start breaking the business down into sections that can be jettisoned if they fail.

[htuttle]

3. Then we should buy General Motors and run it as a national auto company...

...or let them fail, and assume the 'invisible hand of the market' will fill in any vacuums with jobs from foreign car companies that don't have their heads quite so far up their asses.

By the way, we could BUY EVERY SHARE OF GM STOCK FOR $1.84 BILLION dollars right now:
http://finance.yahoo.com/q?s=gm
(look at 'market cap')

That's a hell of a lot cheaper than $200 billion dollars! If a company is 'too big to fail', then it's critical to US security and should be nationalized....

[RUMMYisFROSTED]

24. Great way to start the Green Revolution.

[ohio2007]

26. what about the $65 hr job outlook ?

Unions are going to strike with "government croonies" sitting at the table negotiating for the good of the country.

US of Europe style.

Let them crash and burn. Something better will grow out of the ashes. too bad big buisness has so many lobby members willing to keep hope alive

[and-justice-for-all]

4. Why would a private company cost us tax dollars?

Either you do not bail them out and nationalize the company or you say tough shit, sorry about your luck. Do they want a free market system only when it works to their advantage, only to come begging for our tax dollars for a cooperate welfare hand out?

Either it is a free market or it is'nt.

[sam sarrha]

5. paychecks/sales tax...

[AndyTiedye]

6. Unemployment Benefits, Lost Tax Revenue…

[and-justice-for-all]

12. Oh, I see...

They mean what GM pays into those things would cost us more then the bailout they want/need.

I misread the OP.

[sarcasmo]

7. The right claims AIG was to big to fail, I would argue GM is even bigger.

The only reason the right wants GM to fail is because it's a Union company.

[adamuu]

8. another ransom note.

This is like Nigerian Scam.

[ixion]

10. exactly

they're not even being creative... just pulling the same shit over and over again.

[depakid]

30. Economic reality

Unless of course, you renege on unemployment, Medicaid, food stamps, etc.

This on top of the loss of tax revenues by the otherwise employed. And multiplier effects that could have been gained by people having more disposable income to spend in their local communities.

[Skink]

9. Why do republicans oppose this?

[liberal N proud]

11. UNIONS

They want all unions to fail. Failed automotive industry would achieve that.

[sarcasmo]

31. Union jobs down the drain.

[Psephos]

34. Most progressives could care less about those union jobs when it comes to buying their own car n/t

[sarcasmo]

36. Having grown up in a GM family I understand the value of a Union.

[AdHocSolver]

13. If the U.S. "buys" GM, it should be on the condition that we pick a NEW management team to run it.

When company "A" buys company "B", they get to replace the existing management with executives of their own choosing.

Since the biggest problem with GM has been an arrogant, incompetent management, the company should only be "saved" if we can install new, and hopefully better, new executives.

Otherwise, the existing management is being rewarded for greed and incompetence.

[customerserviceguy]

21. I'm sure the present management teams

of the Big Three have golden parachute packages that might only be voidable in bankruptcy. If the US bought GM and/or Ford on the open market, they'd still have to honor those contracts, made by previous boards of directors.

Since all the muckety-mucks serve on each other's boards, it's all been a giant circle jerk.

[amitta]

14. fear mongering

give us the $25 B or else !

lets just make an invisible company with an invisible product and hire everyone in america, then have a bailout every year.

[lib2DaBone]

15. Sell the company to the Employees... Eliminate the Bankster/Gangsters

[w4rma]

16. Yup. Buy GM for 1.84 Billion and reorganize it into a cooperative. (nt)

[KakistocracyHater]

17. bravo!

I agree, 10-fold.

[Psephos]

35. That worked so well for United Airlines

or did it?

[madmadmad]

18. good idea!

[excess_3]

19. buy up all GM stock, give it to the union

would cost 4 billion or so.


problem solved

[CTyankee]

22. Do I get dollar for dollar on my investment in GM preferred stock?

I am currently getting 7.5% and it is one of my investments helping me through my retirement. I am not rich, BTW, and I am diversified. But still, this would be a chunk out of my income and I already live modestly...

[ohio2007]

27. who's $ is going to buy all this stock and just hand it over to union bosses who are not elected by

the public ?


Thats like saying "Raise the US minimum wage to $50/hr"......
problem solved.

[eilen]

20. Chapter 11

reorganize. I'm pretty much coming to the conclusion that the only bailout from American taxpaying citizens should be directly to American taxpaying citizens, not to corporations. Look at the last bailout. You really think GM will stop closing plants if they get a bailout? Do you really believe that will ebb the flow to outsourcing? Do you really think this will stimulate them to innovate? Cut executive bonuses, stop sending out dividends?

[whosinpower]

23. I simply do not believe that

Someone will buy GM at a price that is profitable - the real question is what is that price? And that answer is what no one wants to talk about - because it would mean that GM is worth far far less than anticipated.

Look - they made vehicles that are no longer desirable, cost too much up front, and cost too much to run and maintain.

They had thirty YEARS to innovate into something far more fuel efficient after the 70's oil crisis - and they did not.

Why subsidize a harness maker that employs many many people when no one buys harnesses anymore, and horses are gone? There are too many harnesses on the market - and yet, for such an oversupply - we have not seen a radical drop in prices have we?

I say - let em flail. Sorry and that might seem cruel, but true innovation only comes out of stark naked necessity.

[ohio2007]

25. ...and they will continue to build SUV's and ignore why they "should' have gone extinct.

Failure IS an easy payday.
Now lets 'stay the course',buisness as usual model until the next crutch is thrown under the coporate welfare armpit.
Don't worry, the public will pay at the pump with a patriotic gas tax

[Devil_Fish]

28. Bush says "don't disturb capitalism" therefore it is imperative that we let them fail.

They could have made billions with the EV1. they should be asking Chevron and Shell for a bail out. I'm sick of their bull shit. they could have made them selves into a competitive company with the EV1. this crappy Volt idea is too little/ too late. If they are bailed out, it will just cost the tax payer that much more when they fail. which they will, because it will just be business as usual if they are bailed out.

Doing the same thing over and over expecting different results is the definition of insanity.

Fuck GM. let them die. It will be due to their poor management. Not lack of our blood and sweat.

[dpbrown]

29. Quit making stupid gas-guzzling cars that people can't use, idiots!

The automobile industry is like the dinosaurs it relies on to power its products.

Let it go extinct.

[DU GrovelBot]

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[GeorgeGist]

33. The Profits of Doom and Gloom ...

are mighty costly to taxpayers and consumers.

Perhaps GM et al should consider going non-profit and save everybody money; except GM et al's owners, of course.