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J. Gondeck: Where is the payback?

Jeff Gondeck
Letters |
Tuesday, February 21, 2012

I just heard the great news that General Motors is turning a profit. When does it plan on paying back the American public that bailed them out? When should we see our payback from the banks, mortgage companies and others the public bailed out?

Hey, President Obama, I'm still waiting for mine. Or is that his real objective, to have the government take over?

Sounds like socialism to me.

Jeff Gondeck, Turner

Editor's note: So far, through earlier stock sales and loan repayments, the government has recouped almost half of the $49.5 billion bailout to General Motors.

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armorin's picture
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So Jeff decides to write a

By Tony Morin, verified user — Tue, 02/21/2012 - 09:05

So Jeff decides to write a letter on a whim without doing any research or having any apparent knowledge about the subject. Thanks buddy. Did you know that you can save money by switching to Geico? The majority of banks have paid back in full. GM has partially paid back. If the Treasury plays the market right, it could sell it's stock and recoup 100% of the GM bailout. BTW, who signed this crazy bill into law anyway. Oh, it was George wasn't it. Socialist!!!

veritas's picture
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Jeff

By Ronald Riml, verified user — Tue, 02/21/2012 - 01:17

And the problem with this 'Semi-Socialism?"

It kept the 'Capitalism' of thousands of suppliers in business......

You can be a Purist at the risk of being a Poor Purist.....

mgr's picture
verified

Ronald, You’re up to painting

By Mark Gravel, verified user — Tue, 02/21/2012 - 09:58

Ronald,
You’re up to painting a picture with a brush that only one bristle again.

1. Demand – let’s assume that for any given year the demand for automobiles is, say, X units. Regardless of whether GM kept its doors open or not, people would still demand automobiles. Volumes would remain relatively the same, but people would simply buy other makes and models.

2. Suppliers – predicated on demand, there would still be a need for suppliers. Moreover, as most automobile parts are built outside the U.S., it may not make much of a difference anyway to the U.S. economy.

3. Dissolving GM – If GM were to go under, not all of GMs production would vanish into the night. Perhaps another auto-maker would buy GM’s assets and keep the most profitable cars in production, or other auto-makers would pick up more demand for existing models.
The takeaway here Ronald, is that there are other alternatives which perhaps would provide relatively the same output at much less the cost to the taxpayer. Moreover, GM could exit its cycle of poor management decisions stronger and more profitable that it is now for you see, the bailout prevented GM from shedding bad management practices that got it to the brink of bankruptcy in the first place.

veritas's picture
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Illogical assumption, Mark

By Ronald Riml, verified user — Tue, 02/21/2012 - 10:17

Illogical assumption, Mark

GM goes under; U.S. suppliers and dealers take their big hit; unemployment cascades - demand for automobiles falls accordingly - volume goes to hell in the U.S.

mgr's picture
verified

Ronald, 1. Demand for

By Mark Gravel, verified user — Tue, 02/21/2012 - 10:47

Ronald,

1. Demand for automobiles tank. Could it happen, yes, but not likely? As an analogy, look at the sharp drop off in production for Toyota models due to the Japan earthquake. Demand did not tank, it just shifted to other makes or models or from new to use Toyota models. Perhaps some people sat on the sidelines waiting for production to resume.

2. GM has billions of dollars in assets and manufacturing capacity other automakers could pick up at bargain prices. It is unlikely these assets would go idle.

3. GM and GM’s supply chain are not the sole employers in the U.S., so your doomsday cascading unemployment scenario is not a likely. OEM and aftermarket parts supplies would probably see little to no change in demand since they are in the business of providing goods and services to existing cars on the road. Again, supplying parts to the manufacture of new cars would shit to accommodate production of different makes and models – that is assuming no GM lines are kept in production by those who buy GM’s assets.

Your whole argument is predicated on economic status quo, and it fails to account for shifts in manufacturing to meet newly created demand of other makes and models. Then again, it does sound better when you paint the apocalypse with your single bristle brush as justification for government intervention.

Remember, the economy is bigger than GM.

veritas's picture
verified

Wrong again

By Ronald Riml, verified user — Tue, 02/21/2012 - 13:04

Demand did not tank in Japan.

Demand tanking in U.S. due to economy - that's what led to demise of manufacturers. You forgot that color of paint in your palette.

mgr's picture
verified

Is it not a core competency

By Mark Gravel, verified user — Tue, 02/21/2012 - 22:40

Is it not a core competency of a manufacture to nimbly scale up/down production to meet demand? The failure to respond to changes in demand is part in parcel due to poor management. Or perhaps, GM seized on the opportunity for free money.

You are also interleaving two disjoint issues. You previously stated that a collapse of GM would change the demand curve for automobiles. My rebuttal was not by that much since GM represents only a small fraction of the overall economy and the excess demand would be satisfied by other manufactures.
Your precise comment below:

“GM goes under; U.S. suppliers and dealers take their big hit; unemployment cascades - demand for automobiles falls accordingly - volume goes to hell in the U.S.”

Please keep your apples and oranges in separate bins.

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