Help Him Understand the GM Bailout Fallout

General Motors is once again driving itself into the ground.

This past weekend, General Motors announced a deal with Manchester United relating to sponsorship of their shirts. The deal was announced at $559 million dollars and is expected to run through 2020. Shortly after the deal was announced, GM removed its global advertising director from his position. The deal as publicized is more than twice what Manchester United was paid by its previous automobile sponsor.

Did I just read that right? Did you? I seem to remember a few years back that General Motors was about to go under, until the government stepped in and saved them. This earned GM the moniker of "Government Motors" with President Obama as its CEO.

Apparently things have changed in Motown and the big wigs are once again rolling around in piles of cash. Enough so that they can give a European soccer team a HALF BILLION DOLLARS for a 2 inch patch on their shirts. Granted, Man U is the most storied franchise on the planet, but I mean does this make sense? Am I left to believe that we will see Her Highness Queen Elizabeth tooling around London in her Corvette anytime soon?

I know nothing about running a car company, I admit it. But if GM really thought this was a smart move, why did they fire the man who signed the deal the next day? Perhaps because they knew the backlash that was on the way?

But (and I could be wrong here) there has been nothing on the news about this. No politician speaking to it, and the White House is silent.

GM spent a little over 4 billion on advertising last year. They are on pace to sell a little over 5.6 million cars this year. That ads up to about $775 on every car they sell, just in advertising. I know nothing about it, but does that seem like a lot?

Am I crazy? Or does a company that received a taxpayer funded $50 billion  bailout have a responsibility to change? Is this a good example of what GM thinks is a smart business decision? Especially when only less than 10 percent of that bailout has been paid back!

Please help me to understand this.

Does this make you as upset as it makes me?

Why are all the politicians so silent about this?

It makes me want to scream! I have asked a lot of questions here, I admit. And as I have said multiple times, I have no idea how to run a car company. But perhaps whoever is in charge at GM doesn't either!

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Jim Rizoli August 07, 2012 at 08:20 PM
The way you respond is don't buy their cars. Jim@ccfiile.com
Dave Lenane August 07, 2012 at 08:37 PM
Great! Then Obama cuts them another check!
Larry August 08, 2012 at 03:31 AM
Part of the misunderstanding and misplaced outrage comes from a failure to remember the the original GM bailout came from TARP funds, directed by Bush. The US Congress voted AGAINST the auto bailout, but President Bush declared that he was empowered to use TARP funds in any manner he deemed necessary. For those not remembering this reality, here's the video of Bush announcing his auto bailout: http://www.youtube.com/watch?v=W1C_ZdborAk Was GMs marketing decision stupid? Probably. Is the partisan whining of ""Government Motors" with President Obama as its CEO" revisionist history? Demonstrably. Just read the actual history and watch the video.
Dave Lenane August 08, 2012 at 08:38 AM
Larry, by no means was I directing any criticism at Obama. If I remember correctly Bush OK's 20 Billion and Obama another 50 Billion to keep GM afloat. The remark about Obama being the CEO was made in jest, as well as calling GM Government Motors. I could care less which President gave them the money. I care about the fact that it is not being paid back! Although in GM's eyes the entire loan was paid back by giving the Treasury department GM shares. But they put a stipulation that the shares could never be cashed in.
Kevin Mullen August 08, 2012 at 06:52 PM
I don't believe that is true Dave. The government cashed out some of the stock already. Many have questioned why they are still holding it but I think the consensus I've read is that if they sell now they will end up losing money on the whole deal. They need the stock price to keep rising in order to make up the full amount that GM owes that. Everything I see also just talks about GM getting $50 billion, not $70 in total. Bush's announcement was in the final days of his presidency and Obama's administration gave out the bulk of the TARP funds. I found a good summary of the government's decision on holding the stock at http://www.dailyfinance.com/2012/03/28/gm-government-motors-washington-obama-tarp-stock/. Doesn't sound like we will be getting the money back any time soon with a breakeven value of $53 per share. Not out of reach compared to their historic highs but they will need to keep putting together solid quarters.
Dave Lenane August 08, 2012 at 11:42 PM
Kevin, thanks for clarifying that! I was under the assumption that the total loaned to GM was 70 billion. But I guess it depends on which website you read. I still think the decision to give Manchester United a half a billion dollars is insane. I just want to see the money paid back to the taxpayers.
Dave Lenane August 08, 2012 at 11:51 PM
Just to be honest, I found this article on CNN that says GM has paid back half of the 50 billion it was loaned. But it also says the other half will probably never be paid back. Its very confusing to figure out exactly what has been returned to the taxpayers. It seems as if every website has its own amount. Either way the original point stands. Is this a responsible business decision? Should the President address it? http://money.cnn.com/2012/02/16/news/companies/gm_bailout/index.htm
Kevin Mullen August 09, 2012 at 11:46 AM
Even though we are the majority shareholder in GM I'd be wary of the government stepping in on this. I do agree that it appears to be a ridiculous decision on the face of it and the executive who executed the agreement. Sounds like he was hiding the true cost off it from the rest of the higher ups there and was shown the door when it was revealed. Frighteningly it sounds like the deal was originally for even more than the $559 made public now. One last fact check on this one - GM sold over 9 million cars and is on track to do so again. I think the 5.6 million was just US. In the end deals like this rub consumers the wrong way. I always laugh when I hear how much companies are willing to pay to put their name on a stadium or a uniform or something. I know it usually includes lots of other marketing pieces as well but still, it just seems wasteful.
UglyHat August 09, 2012 at 02:41 PM
I’m with you Dave. No matter which party is in the WH, or holds majority in Congress taxpayers should not be bailing out private industry. Ever! Nothing is too big to fail. Bankruptcy laws work fine. They’ve worked for big business like airlines for decades. Let them follow the process and if they can survive, great. If not, let them break it up and sell it off. If market demand still exists someone else will step in to fill the gap. Funding a company with money they didn’t have to earn leads to a repeat of the stupid decisions that got them in trouble to begin with. Seems to me they’ve learned nothing from 2008, probably because they were not hurt by it. I wonder what the benefits package for the guy that got ‘fired’ was. I’ll bet he isn’t hurting much today either.
Dave Lenane August 09, 2012 at 04:44 PM
Thanks Ugly Hat and Kevin! Good thing you're checking up on me Kevin! LOL...I could be like FOX news and not put out the right info!
Dave Lenane August 10, 2012 at 08:58 AM
So now we learn a piece of the truth! Nice of GM to help out Manchester United pay off some of their staggering debt. Too bad they forgot about their own and what they owe American Taxpayers. http://money.msn.com/top-stocks/post.aspx?post=7638d1df-b3cb-483d-adae-4c943adbabcc
Linda Worthy August 10, 2012 at 02:00 PM
Are we seeing a pattern here? Mr. Lenane makes statements that are challenged by others and he immediately backs off and apologizes. He did it his asinine rant attempting to draw a parallel between the death penalty in a capitol murder case and the decision of a college sports organization. A parent of a current Penn State student challenged Mr. Lenane and he fell all over himself apologizing. Now he writes that President Obama is the CEO of General Motors and when challenged he folds and claims “I could care less which President gave them the money.” If he didn’t care, why did he target Obama and not include Bush or leave out the comment entirely? He claims his comment was ‘in jest’ while nothing in his original statements would lead any reader to think that. Fact checking occurs BEFORE one publishes Mr. Lenane -- only amateurs leave it to the reader to correct the writer. It is a good thing Kevin is checking up on Mr. Lenane -- much like a parent checks up on their teenager. This fact is proven, Mr. Lenane: your readers are smarter than you are. I’m sure glad we don’t go to the same family gatherings.
Dave Lenane August 10, 2012 at 04:39 PM
I guess I should be happy about one thing though....Linda spelled my name right...of course GM just took a bath in Europe losing $339 million dollars...but Linda is ok with that! What's the big deal? The Feds and OBAMA will cover it!
kl bruzzi August 10, 2012 at 05:49 PM
Dave, you are above that comment.
Dave Lenane August 11, 2012 at 12:37 AM
kl...I deleted it....Thanks! Hope that isn't backing down though!
Dave Lenane August 11, 2012 at 12:54 AM
I'm posting this just as an example that I did not think up the whole "Government Motors" / Barack Obama as CEO thing out of the blue. I don't have a picture of Obama on my wall. But I don't hate the guy either. I'm a Republican that is still very unsure who to vote for. But when I see an American Company (that just got bailed out by US Taxpayers) bailing out a European Soccer Team with 100 million dollars cash up front, it gets me upset. Heck I could easily be wrong as it seems to have gone WAY below the radar. Maybe it isn't that big a deal, but it still makes me upset! Have a GREAT weekend everyone!!! http://www.youtube.com/watch?v=TofiMLv6xrg
Myd Nevins August 11, 2012 at 06:55 PM
A person can change his views and opinions. That's what debate is for. This is Patch. Its not the NY Times. Amateur status is just fine. Its still a contribution.


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