No Runny Eggs

It’s been a while since I last ran the numbers on the transfer of taxpayer wealth to UA…er, bailout of GM, Chrysler, and their affiliated credit companies. Due partly to the profit turned today by the UAW VEBA on GM’s bankruptcy, and due partly to wild claim from Car Cza…er, Commissar Steven Rattner that the taxpayers will get back all but $14 billion (I think The Right Scoop misquoted from the clip due to an off-camera cough) of the auto-related bailouts, it’s time to once again go through what has and has not been recovered. Thankfully, the Treasury Department has a PDF-ed spreadsheet to help track all the changes between last October’s look and the end of November 2011. Before I do, however, I have to note Zip caught the expiration of yet another Obama statement – that the Treasury would be paid back in full for the auto bailouts.

To review, back in the beginning of October 2010, $65.89 billion of the $72.59 billion spent on old General Motors, new Government Motors, old Chrysler, new Chrysler/UAW Motors/Fiat, Chrysler Financial, and GMAC/Ally (more-correctly called Government Bank), including $0.04 billion in notes taken out by new Chrysler I was previously unaware of, was still outstanding. Since then, the Treasury has recovered:

• $13.50 billion from the sale of some of its common stock in GM between 11/18/2010 and 11/26/2010, leaving it with a 32.04% stake.
• $2.14 billion from the early buyback by new GM of all the Series A preferred stock held by the Treasury.
• $0.11 billion of the $0.99 billion in loans that remained at old GM, paid to the Treasury on 3/31/2011, 4/5/2011 and 5/3/2011 as old GM was liquidated.
• $5.46 billion from new Chrysler to “fully” extinguish the TARP loans, including the previously-undisclosed notes, on 5/24/2011. However, $3.5 billion of that repayment appears to have come from an Energy Department loan program meant for modernization of assembly plants dedicated toward fuel efficient/”clean” vehicles.
• $0.56 billion from Fiat for the remaining 6.6% stake (plus the rights to “excessive” proceeds from the sale of the UAW’s share of new Chrysler) the Treasury held in new Chrysler on 7/21/2011.
• A bit under $0.01 billion ($9.67 million) as the last bit of cash was wrung out of the remains of old Chrysler, credited on 12/29/2010.
• $2.67 billion from Ally for the extinguishing of the Trust Preferred Securities held by the Treasury on 3/2/2011.
• $0.79 billion in dividends on preferred stock in Ally between November 2010 and November 2011.

The $25.24 billion recovered over the past 13 months brings the amount still outstanding from the bailout of the auto industry down to $40.65 billion. The Treasury also converted 110 million of the nearly 229 million perferred shares it held in Ally to 531,850 common shares to give it control of 73.8% of the common shares.

The remaining claims on assets the Treasury holds are:

• 500,065,254 common shares of new GM. At yesterday’s close of $19.47 per share, the Treasury would get about $9.73 billion (give or take brokerage fees) if they were able to sell their 32.04% stake.
• $0.88 billion in loans still owed by old GM, which will likely never be recovered.
• A continuing stake in whatever assets can still be liquidated from old Chrysler, likely to be very minimal.
• 118,750,000 Series F-2 Preferred shares in Ally Financial, which if Ally does not pay $5.94 billion plus any outstanding dividend (9% annual dividend, or $0.53 billion per year) to extinguish the preferred shares, will be converted to, at the present value, 513,000 common shares in Ally at the end of 2016. The dividend through the end of 2016 would net the Treasury $2.67 billion.
• 981,971 common shares in Ally, which represents 73.8% of the outstanding common shares in the privately-held company.

Last year’s estimate of $17 billion down the UAW hole once all the dust settles still seems quite operative, assuming the government is willing to let go of both GM and Ally. If it’s not willing to let its seizures go, then far more money will have gone down the UAW hole.

Let’s compare that to the UAW take. I previously covered the all-but-guaranteed $28.39 billion in post-bankruptcy payments from GM (not counting anything from the sale of the UAW’s stock in GM, currently worth $3.12 billion) on $20.36 billion in pre-bankruptcy liabilities from GM the UAW VEBA will get, and except for the dividend payments that have now made UAW’s profit official, nothing has changed. I hadn’t covered the UAW’s recovery schedule of the $10.5 billion owed it by old Chrysler as, up until earlier this year, it had not fulfilled its (voluntary) promise to file reports with the SEC. Now that it is filing the reports, that can be tracked.

Much like it did from GM, the UAW received the cash set aside by old Chrysler pre-bankruptcy for the VEBA. In this case, it was about $1.5 billion. For the remaining $9 billion in unsecured claims against old Chrysler for its VEBA, the UAW received what is currently a 44.7% stake in new Chrysler (after various options exercised by Fiat diluted its initial 67.7% stake) and a $4.59 billion unsecured note carrying an effective 9% annual interest rate and maturing in July 2023. While the repayment schedule is back-loaded, payments did begin in 2010, with a $315 million payment in 2010 and a $300 million payment in 2011. Assuming all the payments are made, the UAW will get $9.16 billion.

That does not include any money it might get from the liquidation of its stake in new Chrysler. That is limited to $4.25 billion (plus 9% compounded annually starting from 2010, or about $5.05 billion if Chrysler goes public in January 2012 and the UAW sells its entire stake) with any excess going to Fiat after Fiat bought the Treasury’s rights to that excess for $60 million and the Canadian government’s rights to that excess for $15 million. Fiat also holds a call option to buy up to 40% of the original UAW stake between mid-2012 and mid-2016 for, depending on whether Chrysler has gone public, either the going stock price or a formula.

Item #1 (H/Ts – Kevin and Fausta) – The same Chevrolet Volt involved in a garage fire last week burst into flames a second time Monday.

Item #2 – The Wall Street Journal reports that the US Treasury is looking to dump the remainder of its holdings in Government Motors (500,065,254 shares) over the summer. At the current trading price of $29.51, that would mean we the taxpayers lost over $14 billion on just the auto-manufacturing part of the GM bailout while (assuming GM makes it to the end of 2014 and the UAW fully cashes out), the entity that was most-responsible for the collapse of Old GM, the UAW, would make $12.55 billion on the deal.

That led Warner Todd Huston to unveil the last car from the current version of GM – the Government Motors WeeKan.

(H/T – Darleen Glick via Allahpundit)

No, it won’t be the American taxpayers that will profit from the ongoing saga that is Government Motors. The Washington Times notes that the big winner of last week’s IPO of GM will be the United Auto Workers, specifically their Retiree Medical Benefit Trust Fund (aka the VEBA that all three domestically-owned auto makers shifted their retiree health costs to). The numbers quoted in that story of $3.4 billion from the IPO and a “break-even sale” price of $36 aren’t quite accurate (they’re both high, the latter far more so), so I’ll walk you through the math:

• Old GM had, when it went into bankruptcy, $20.56 billion in unsecured liabilities owed to the VEBA.
• Exiting bankruptcy, Government Motors gave the VEBA:
  • 262.5 million common-stock shares
  • $6.5 billion in senior perpetual preferred stock with a 9% dividend and a 5 1/2-year restriction on buy-back by GM, worth a minimum of $9.72 billion if bought back at the earliest possible date.
  • A $2.5 billion secured note with a 9% annual interest rate and a maturation date in 2017, payable in three $1.4 billion chunks in 2013, 2015 and 2017.
• VEBA already received $3.65 billion in cash as follows:
  • $0.73 billion in dividends on the preferred stock.
  • $2.92 billion on the stock sold (89 million shares at $32.7525/share – the underwriters took $0.2475/share in underwriting discounts and commissions).
• Assuming GM survives through the middle of 2017 to pay off that note and buys back the preferred stock at the end of 2014 as soon as it can, it will get an additional $13.19 billion in cash from:
  • The remaining $8.99 billion in future dividends on and buy-back of the preferred stock.
  • $4.2 billion from the principal and interest on that $2.5 billion note.

Assuming the underwriters do exercise their over-allotment option to buy another 13.35 million shares at the discounted IPO price (which would get the VEBA another $437 million), that would leave $3.28 billion to come from the remaining 160.15 million shares. That means the UAW would be made whole if they net a fraction $20.48/share for their remaining holdings. Even if JP Morgan and company don’t come riding in to buy the additional shares now, the UAW will need to only net a fraction more than $21.44/share to be made whole. Everything else is pure profit, or at least a further subsidy of UAW Motors (nee Chrysler).

To put it another way, if they dumped their shares now, they would get a total of $22.12 billion in cash from Government Motors, compared to the $20.56 billion liability that Old GM had going into bankruptcy.

Meanwhile, the remaining unsecured creditors of old GM, mostly the bondholders, will be lucky to get 23 cents on the dollar once the liquidation of GM is complete and they get their pro-rated portions of the 150 million-180 million shares in Government Motors.

(H/T – Monty)

David Weidner over at The Wall Street Journal found this little “gem” in the prospectus for Government Motors’ common-stock IPO (emphasis in the original; the emphasized part is quoted in the WSJ article):

We have determined that our disclosure controls and procedures and our internal control over financial reporting are currently not effective. The lack of effective internal controls could materially adversely affect our financial condition and ability to carry out our business plan.

Our management team for financial reporting, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our internal controls. At December 31, 2009, because of the inability to sufficiently test the effectiveness of remediated internal controls, we concluded that our internal control over financial reporting was not effective. At September 30, 2010 we concluded that our disclosure controls and procedures were not effective at a reasonable assurance level because of the material weakness in our internal control over financial reporting that continued to exist. Until we have been able to test the operating effectiveness of remediated internal controls and ensure the effectiveness of our disclosure controls and procedures, any material weaknesses may materially adversely affect our ability to report accurately our financial condition and results of operations in the future in a timely and reliable manner. In addition, although we continually review and evaluate internal control systems to allow management to report on the sufficiency of our internal controls, we cannot assure you that we will not discover additional weaknesses in our internal control over financial reporting. Any such additional weakness or failure to remediate the existing weakness could materially adversely affect our financial condition or ability to comply with applicable financial reporting requirements and the requirements of the Company’s various financing agreements.

I’m shocked, SHOCKED that a government-run enterprise has no effective control over its disclosure and financial reporting. If I didn’t know any better, I’d say it almost looks like Government Motors is lying in order to shift the cost of propping up the UAW and ensuring millions of dollars in donations to Democrats for the couple years Government Motors will survive from the Treasury to the suckers on Wall Street.

Weidner also noted that the prospectus warned that its defined-pension funds are underfunded to the tune of $17 billion. That $4 billion payment to be made from both cash on hand and the sale of the Series B preferred stock won’t make much more than a short-term dent in that.

TheTruthAboutCars.com found an interesting tidbit in the official TARP 2-year retrospective – $17 billion of the $80 $73 billion spent on General Motors/Government Motors, GMAC/Ally Bank, Chrysler/UAW Motors and the former Chrysler Financial will never be recovered. Let’s walk through the numbers, using the August 2010 monthly report to Congress and monthly interest/dividend report, and remembering the $6.71 billion “loan repayment” from Government Motors represented a writedown of TARP money promised to GM:

Net expenditures of $72.55 billion:

• $43.15 billion to GM (does not include the $6.71 billion “loan” that was “repaid” with unused DIP financing, which also came out of TARP)
• $12.26 billion to various entities using the Chrysler name (Old Chrysler, the former Chrysler Financial and UAW Motors – does not include $2.05 billion of available-yet-unused financing from the US Treasury)
• $17.14 billion to GMAC/Ally Financial

Net repayments of $4.09 billion:

• $0.36 billion from GM as payment for a loan for its warranty program (note; this does not include the $6.71 billion “repayment” made from unused DIP financing)
• $1.5 billion from former Chrysler Financial as full payment of loans made to it plus an additional $0.02 billion from Chrysler Financial for reasons unknown
• $1.9 billion from Cerebus (the former owner of Chrysler) to extinguish the remaining $3.5 billion Old Chrysler owed the Treasury and free the former Chrysler Financial from the lien placed on it.
• $0.03 billion in proceeds from the liquidation of Old Chrysler

Interest and dividend payments of $2.61 billion:

• $0.14 billion from pre-bankruptcy GM in interest payments
• $0.34 billion from Government Motors (New GM) in interest payments (it is impossible to separate the legitimate warranty loan repayment and earlier loan payments from the much-larger sham “loan repayment”
• $0.18 billion from New GM in dividend payments on preferred stock
• $0.01 billion from the former Chrysler Financial in interest payments
• $0.06 billion from Cerebus/Old Chrysler in interest payments
• $0.25 billion from UAW Motors in interest payments
• $1.63 billion from GMAC/Ally Financial in dividend payments on both preferred stock and trust preferred securities

That leaves somewhere around $65.85 billion in expenditures on Government/UAW Motors and their financing arms uncollected thus far. However, there’s still significant amounts of money the Treasury has claim to, and which the 2-year retrospective assumes will be repaid:

• $2.10 billion in preferred stock in New GM, which pays an annual 9% dividend (or $0.19 billion per year), which cannot be liquidated by GM until 12/31/2014 and until any outstanding dividend is repaid. That required dividend amount pushes the minimum preferred stock liquidation amount to $3.05 billion.
• $0.99 billion in loans still owed by Old GM, almost certainly not to be repaid anywhere near in full.
• $2.00 billion in loans to UAW Motors at a minimum 7% interest (or the 3-month LIBOR rate plus 5 percentage points if that’s higher), due at the end of 12/2011, and $3.09 billion in loans to UAW Motors at a minimum 9.91% interest (or the 3-month LIBOR rate plus 7.91 percentage points if that’s higher), due at the end of 6/2017. With a total of $2.55 billion in interest left if both loans go to maturity, that would bring the total amount due from UAW Motors to $7.64 billion.
• 228,750,000 Series F-2 Preferred shares in Ally Financial, which if Ally does not pay $11.43 billion plus any outstanding dividend (9% annual dividend, or $1.03 billion per year) to liquidate the preferred shares, will be converted to, at the present value, 988,200 common shares in Ally at the end of 2016. The dividend through the end of 2016 would net the Treasury $7.21 billion, at which point it will increase its holdings to a majority of authorized Ally common stock (it currently holds 450,121 shares, 56.3% of outstanding stock and 22.3% of authorized stock).
• Trust Preferred Securities in Ally Financial with a liquidation value of $2.67 billion plus any unpaid distributions, which carries an 8% annual distribution rate (or $0.21 billion per year) and is effectively a 30-year note.

Assuming the UAW Motors loans go to maturity and actually get paid back in full, Government Motors liquidates its preferred shares as soon as it can, Ally Financial manages to retire its Trust Preferred Securities at the end of 2011, and Ally decides that just-under-half its common stock is not worth $11.43 billion (likely because 51% of the company was bought by a consortium led by Cerebus for $7.4 billion in 2007), somewhere around $21 billion will come into the Treasury by the end of June 2017. That would leave $44.85 billion unpaid. Given the government assumes it’s still going to lose $17 billion, the sales of the 61% stake in Government Motors, 10% stake in UAW Motors, and 81% stake in Ally Financial together are expected to bring in somewhere less than $28 billion.

(H/T – Van Helsing)

If you thought the Chevy Volt was a bad deal, wait until you get a load of this. I present the lede from Bloomberg’s story on Government Motors buying subprime lender AmeriCredit Corp. for $3.5 billion:

General Motors Co., the automaker 61 percent owned by the U.S., is buying subprime lender AmeriCredit Corp. for $3.5 billion to help it reach more customers with leases and loans to borrowers with faulty credit records.

A couple points of order:

• Where, exactly, did Government Motors get the $3,500,000,000 to pay a 24% premium for a company?
• Isn’t the bubble of the subprime lending market, something Government Motors explicitly said it would restart, a major contributor to the Double-Dip Dempression we’re in?

Quoting American Enterprise Institute’s John Berlau, “When we bailed out GM, what were we bailing out? The rationale behind the financial-regulatory bill that just passed was that subprime lending was bad, but the government’s in the subprime business.”

Most of my friends are seizing on the wrong aspect of the report on Government/UAW Motors’ closing of dealerships from TARP’s Special Inspector General. Private (or putatively private) enterprise, especially one in such bad financial shape that it is in bankruptcy, does not have a responsibility to be an employment-for-all agency. Indeed, government has neither the responsibility nor the authority to be an employment-for-all agency.

Rather, it’s the processes used by Government Motors and UAW Motors to shut down certain dealers, and the acceleration of the shutdowns ordered by the Obama administration’s Auto Team, that bear scrutiny. The report noted that the Auto Team ignored advice given by both the companies and outside experts that a rapid shutdown to match foreign car companies’ models might not be appropriate, “particularly in small markets in which the U.S. companies currently have a competitive advantage.” Indeed, both Chrysler execs and at least one outside expert told the Auto Team that shutting down dealers in the middle of a recession could hurt sales even worse and in such a way that it would take years to recover.

The report also noted that in the wake of legislated arbitration applying to both Government Motors and UAW Motors, a senior GM official stated that the final number of dealerships wouldn’t affect the recovery of GM. Taken together with the 216 GM dealerships restored (out of 1,454 cut) and 50 UAW Motors dealerships restored (out of 789 cut), the report “suggests, at the very least, that the number and speed of the terminations was not necessarily critical to the manufacturers’ viability.” At the same point, the report notes Ford Motor Company is closing dealerships at the rate GM had wanted to in its Treasury-rejected February 2009 restructuring plan.

Along the same lines, the report states that the lead advisors for the Auto Team, Ron Bloom and Steven Rattner, did not consider cost savings to be a factor in determining the need for dealership closures. You heard right – there was no business case made by the Auto Team to close the dealerships that were closed. Indeed, it was only after Congress demanded a cost-savings analysis that GM ginned one up out of whole cloth.

While UAW Motors appeared to follow its set of guidelines, the report noted that those guidelines included subjective elements such as choosing which dealers get to add product lines they previously did not carry and whether the market served was a “desirable” one as part of an implementation of Project Genesis (a pre-bankruptcy plan to have every Chrysler Group dealership carry every Chrysler Group brand). In at least one unnamed market, subjectivity cost the top-performing Jeep dealership its franchise in favor of a slightly-lower-performing Dodge dealership in the same market, with only the explanation that UAW Motors wanted the Dodge dealership and a pair of poorer-performing Chrysler/Dodge dealerships, to sell Jeeps.

Further, UAW Motors didn’t include an appeals process for those dealers axed. The stated reason was they wanted to be rid of those 789 dealers by the time they exited bankruptcy.

As for Government Motors, while the purported criteria for selecting their wound-down dealerships were all objective, the report noted that undeterminable factors outside those measures were used to wind down dealerships, including at least two dealerships who otherwise would not have been wound down. GM did not document why some dealers that met wind-down criteria were wound down while others were not, nor did they have complete criteria data for 308 of their then-5,591 dealerships.

While GM did have an appeals process for dealerships selected to be wound down, it was a criteria-free process. GM did not provide guidance for the data dealerships were to submit as part of their appeal, did not establish criteria for the review of the appeal, and did not document the reasonings behind the decisions to either grant or deny the appeal.

All in all, the report leaves the possibility that the closure of dealerships was, at least partially, driven by politics and especially the donation records of the principals of the dealerships, wide open.

I really should’ve done this last week, but I really need to walk through the numbers behind Government Motors. First, let’s review what went to General Motors before and during its bankruptcy:

• The US Treasury provided the following loan facilities to General Motors before and during bankruptcy – a total of $19.76 billion in unsecured and $30.1 billion in senior secured debt facilities ($22.58 billion used), or $49.86 billion offered ($42.34 billion used):
  • $13.4 billion on 12/31/2008
  • $2 billion on 4/22/2009
  • $4 billion on 5/20/2009
  • $0.36 billion for warranty obligations on 5/27/2009
  • $30.1 billion in Debtor-In-Possession facility during the bankruptcy, with only $22.6 billion ultimately used
• The Canadian and Ontario governments provided the following loan facilities to GM before and during bankruptcy:
  • $6.3 billion in unsecured loans at times unknown
  • $3.2 billion in DIP facility during the bankruptcy, with only $2.7 billion ultimately used

The entirety of the unsecured debt from all governments, except for the $0.36 billion warranty loan (repaid on June 10), as well as a significant portion of the DIP facility, was forgiven to seiz…er, credit bid for 73% of Government Motors (60.8% to the US, 11.7% to Canada). In addition, $1.175 billion of the DIP financing facility ($0.986 billion from the US, $0.189 billion from Canada) remained with Old GM, with first-right claims on the assets generated from its wind-down.

Meanwhile, only $8.9 billion of the DIP facility was tapped during the under-6-week bankruptcy. As mentioned before, $1.2 billion remained with Old GM, to be repaid with the proceeds from its wind-down. The other $7.7 billion of DIP financing used during the bankruptcy was also part of the credit-bid and forgiven outright. The US portion of that is approximately $6.98 billion.

That left $24.4 billion unused in the DIP facility ($22.11 bilion from the US) on July 9, the day before Government Motors assumed its present form. The Treasury and the Canadians could have taken all of that back, but they decided that their new business venture needed $16.4 billion in “seed money”, as well as some help in the creditworthiness department. They structured $8 billion ($6.71 billion from the US) as a “loan” to be immediately used by GM as it saw fit and to be “repaid” from part of the unused DIP facility, with the other $8.4 billion ($7.89 billion from the US) initially requiring Treasury approval to spend but eventually being under GM’s control. The remaining $8 billion of the DIP facility ($7.52 billion from the US) was effectively returned to the loaners (the Treasury and the Canadians) unused either during or after bankruptcy.

So, how far on the hook are we? Let’s review:

• $19.3 billion in pre-bankruptcy loans forgiven upon exit from bankruptcy
• $0.99 billion of DIP financing owed by Old GM (likely to be repaid only in part)
• $6.98 billion of DIP financing forgiven upon exit from bankruptcy
• $7.52 billion given to Government Motors upon exit from bankruptcy, originally in escrow and now theirs to spend as they see fit
• $6.71 billion “loaned” to Government Motors upon exit from bankruptcy and “repaid” with other government money

We’re still on the hook for about $42 billion. Meanwhile, the Canadians are still on the hook for about $9 billion. Who here thinks GM is worth $69 billion (the market capitalization required to make the Treasury whole)-$75 billion (the market capitalization required to make the Canadians whole)?

Revisions/extensions (11:53 pm 4/27/2010) – Two more plot twists:

• (H/T-Phineas) Forbes reports that Government Motors is using this sham of a “loan payback” to justify getting $10 billion from the Department of Energy to retool their plants. Of note, the “sham loan” carried a 7% interest rate, while the DOE loan carries a 5% interest rate.
• (H/T-Fausta) Fox Business found that, unless Government Motors comes up with $12.3 billion for its pension fund in the next 5 years (with Chrysler UAW Motors needing to come up with $3.4 billion) we’ll be on the hook for most of that shortfall. Fox News analyst James Farrell provides the following scenarios if we still have stakes in Government Motors and UAW Motors when the butchers’ bill comes due in 2014:
  

  *It can approve the payments to the pensions, which would benefit the union pension holders but reduce the likelihood that taxpayers will get their money back on the involuntary investment made in GM and Chrysler stock as well as taxpayers’ status as lenders to the automakers; OR

  *Decline to address the underfunding and let the plans get involuntarily terminated–costing union members approximately $23 billion in overall lost benefits ($18 billion for GM; $5 billion for Chrysler), and costing the PBGC (taxpayers) approximately $14.5 billion.

  “The only option where GAO sees taxpayers not getting the short end of the stick?” Farrell says. “Praying that the auto companies rapidly return to profitability and find $15.7 billion in excess cash lying around in the companies’ corporate couches between now and 2014.”

Revisions/extensions (5:59 pm 5/1/2010) – I did forget to factor in the value of the $2.10 billion of prefered stock the Treasury has in Government Motors, the 9% annual dividend it is due ($189 million per year, payable each quarter), and the fact that they’ll be holding onto that until at least the end of 2014 and until GM comes up with both the liquidation value ($25/share, or the full $2.10 billion if they get want to get rid of it all) and any unpaid dividend.

GM did pay out the first two scheduled distributions on September 15 and December 15, giving the Treasury just over $81 million. It is unknown at this point whether they paid out the March 15 distribution of just over $47 million. That leaves the minimum payback value of the Treasury’s prefered stock at $3.04 billion.

Also, related to that, the federal government (as well as the Canadians and the UAW VEBA, the other holders of the prefered stock) will hold that prefered stock until at least 12/31/2014, as part of the terms of the seizu…er, creation of Government Motors. It is only at that point when GM can buy out those prefered shares, for the aforementioned $25/share plus any unpaid dividend (at the aforementioned 9% per annum).

(H/T – Sammy Benoit via Ed Morrissey)

There is something I didn’t know about the Government Motors numbers when I ran them in September – the portion of the Debtor-In-Possession financing unused during GM’s bankruptcy, specifically $16.4 billion total (or about $14.66 in Treasury funds) went into an escrow account and were used to “repay” the post-bankruptcy loans GM had with the Treasury and Canadian governments. Quoting from the year-end 10-K filed with the SEC (emphasis added):

Proceeds of the DIP Facility of $16.4 billion were deposited in escrow and will be distributed to us at our request if the following conditions are met: (1) the representations and warranties we made in the loan documents are true and correct in all material respects on the date of our request; (2) we are not in default on the date of our request taking into consideration the amount of the withdrawal request; and (3) the UST, in its sole discretion, approves the amount and intended use of the requested disbursement. Any unused amounts in escrow on June 30, 2010 are required to be used to repay the UST Loans and the Canadian Loan on a pro rata basis. Any proceeds remaining in the escrow account after the UST Loans and the Canadian Loan are repaid in full shall be returned to us.…

In November 2009 we signed amendments to the UST Credit Agreement and the Canadian Loan Agreement to provide for quarterly repayments of the UST Loans and Canadian Loan. Under these amendments, we agreed to make quarterly payments of $1.0 billion and $192 million to the UST and EDC, which began in the fourth quarter of 2009. Upon making such payments, equivalent amounts were released to us from escrow.…

In short, the $6.7 billion post-bankruptcy loan should not really have been counted as a “new” loan.

The folks on The Wall Street Journal’s editorial board fired for effect on the “Subsidize Government Companies” proposal from Barack Obama on Saturday (emphasis in the original):

Mr. Obama’s new “Financial Crisis Responsibility Fee”—please don’t call it a tax—is being sold as a way to cover expected losses in the Troubled Asset Relief Program. That sounds reasonable, except that the banks designated to pay the fee aren’t those responsible for the losses. With the exception of Citigroup, those banks have repaid their TARP money with interest.

The real TARP losers—General Motors, Chrysler and delinquent mortgage borrowers—are exempt from the new tax. Why the auto companies? An Administration official told the Journal that the banks caused the crisis that doomed the auto companies, which apparently were innocent bystanders to their own bankruptcy. The fact that the auto companies remain wards of Washington no doubt has nothing to do with their free tax pass.

Also exempt are Fannie Mae and Freddie Mac, which operate outside of TARP but also surely did more than any other company to cause the housing boom and bust. The key to understanding their free tax pass is that on Christmas Eve Treasury lifted the $400 billion cap on their potential taxpayer losses expressly so they can rewrite more underwater mortgages at a loss.

In other words, the White House wants to tax more capital away from profit-making banks to offset the intentional losses that the politicians have ordered up at Fan and Fred. The bank tax revenue will flow directly into the Treasury to be spent on whatever immediate cause Congress favors. Come the next “systemic risk” bailout, taxpayers will still be on the hook. “Responsibility” is not the word that comes to mind here.

It also notes that the $50 billion in assets floor for this new tax is not exactly a “too big to fail” threshhold.

(H/T – The Right Scoop via Ed Morrissey)

BB&T CEO John Allison spoke with Fox Business Channel’s John Stossel about how BB&T was forced to take TARP money despite being sufficiently capitalized…

[youtube]http://www.youtube.com/watch?v=gCEdy_yHkQE[/youtube]

To wit:

– The Bush-era regulators “kindly informed” BB&T that the capitalization rules would be changed for banks who did not succumb to TARP to levels that even BB&T could not meet.
– Fed chair Ben Bernanke, Time’s “Person of the Year” for being instrumental in the federalization of the economy, didn’t want we the people to realize which banks were in trouble.

Revisions/extensions (8:32 am 1/8/2010) – Had the hat-tip links reversed. OOPS!

Revisions/extensions (6:45 pm 9/9/2009) – With a tip of the hat to Owen, we have some more-daunting US-specific numbers from the AP, as well as a Idiotic Quote of the Day nominee. Given that, and a review of the actual report, I’ve decided to ReWrite™ the entire post. The original post is archived and struck through below.

The Congressional Oversight Panel, in charge of keeping track of money expended by TARP, issued a report asserting that most of the $14.3 billion spent on UAW Motors and its predecessor, Chrysler LLC, the $49.9 billion spent on Government Motors and its predecessor, General Motors Corporation, and $16.9 billion spent on other elements of the automotive industry will never be repaid. I’m shocked, SHOCKED to find this out.

Let’s review what happened to the money that went out the Treasury door to the two big auto companies:

• Chrysler LLC (now known as Old Carco LLC)/Chrysler Financial/UAW Motors:
  • Originally-loaned-and-used amounts ($14.31 billion total; does not include credit facilities not used):
    • $4 billion went to Chrysler on 1/2/2009
    • $1.5 billion went to Chrysler Financial on 1/16/2009
    • $280 million went to Chrysler for warranty obligations on 4/29/2009
    • $1.89 billion in used Debtor-In-Possession financing went to Chrysler in May
    • $6.64 billion went to UAW Motors in the form of senior secured debt when it emerged from bankruptcy
  • Repaid amounts ($1.78 billion total):
    • $1.5 billion (the entirety) of the Chrysler Financial loan repaid
    • $280 million (the entirety) of the Chrysler warranty loan repaid
  • Remaining obligations ($12.53 billion):
    • $7.14 billion owed by UAW Motors in the form of senior secured debt (includes $500 million of the original $4 billion loan assumed by the new company)
    • $5.39 billion owed by Old Carco LLC in the form of unsecured debt, not expected to be repaid as the assets of the old company are expected to be exhausted before secured debtors are paid in full
  • Assets owned by the US Treasury:
    • 9.85% of UAW Motors common stock (to be reduced to as low as 8% if Fiat meets up to alll three of its goals to raise its stake from 20% to 35%)
    • A claim of the greater of 40% of Chrysler Financial’s equity value or $1.135 $1.375 billion, to be applied toward repayment of the original $4 billion loan
• General Motors Corporation (now known as Motors Liquidation Company)/Government Motors:
  • Originally-loaned-and-used amounts ($49.89 billion total; does not include a $880 million loan to GM made on 12/29/2008 in exchange for GMAC equity):
    • $13.4 billion went to General Motors on 12/31/2008
    • $2 billion went to General Motors on 4/22/2009
    • $4 billion went to General Motors on 5/20/2009
    • $360 million went to General Motors for warranty obligations on 5/27/2009
    • $30.1 billion in Debtor-In-Possession financing went to General Motors in June and July
  • Repaid amounts ($360 million total):
    • $360 million of the DIP financing repaid (the report scores it as a Government Motors debt repaid, though it was repaid before Government Motors assumed its portion of the DIP debt)
  • Obligations that went toward buying 61% of Government Motors common stock ($39.7 billion total) and $2.1 billion of Government Motors prefered stock (all toward the common stock unless otherwise noted):
    • $13.4 billion (the entirety) of the 12/31/2008 loan
    • $2 billion (the entirety) of the 4/22/2009 loan
    • $4 billion (the entirety) of the 5/20/2009 loan
    • $360 million (the entirety) of the 5/27/2009 warranty loan
    • $19.94 billion of the DIP financing for common stock
    • $2.1 billion of the DIP financing for prefered stock
  • Remaining obligations ($7.7 billion):
    • $6.71 billion of former DIP financing owed by Government Motors in senior secured debt
    • $990 million of former DIP financing owed by Motors Liquidation Company in a Wind-Down Facility, which is secured debt
  • Assets owned by the US Treasury:
    • 61% of Government Motors common stock
    • $2.1 billion of Government Motors prefered stock

The CNN story referenced in the original post notes that the $5.4 billion given to UAW Motors is as good as gone. I haven’t seen any plans on how the US and Canadian governments plan to divest themselves of their stakes in the company, but I doubt they’ll get more than $1.1 billion for the remains of Chrysler Financial or $4.3 billion for an 8% stake in UAW Motors.

Meanwhile, The Wall Street Journal reported in July that Government Motors plans on having an IPO sometime in 2010, with full divesture in 2018. Does anybody believe they’ll get $40 billion for 61% of GM or $2.7 billion for the non-voting prefered stock?

That does not address the possibility that UAW Motors and Government Motors will either dip back into the public trough or re-enter bankruptcy. In that case, even the secured debt might not be paid back in full.

That brings me to the Idiotic Quote of the Day. Let’s have the AP deliver it:

“I think they drove a very hard bargain,” said Elizabeth Warren, the panel’s chairwoman and a law professor at Harvard University, referring to the Obama administration’s Treasury Department. “But it may not be enough.”

Hard bargain? For full repayment of the TARP moneys, the Congressional Oversight panel estimates Government Motors would need to reach a total market capitalization of $67.7 billion and UAW Motors would need to reach a total market capitalization of $57.5 billion. That compares very unfavorably to General Motors’ peak market capitalization of $57.2 billion in 2000 (not adjusted for inflation). Further, if memory serves, Chrysler was never worth more than about $25 billion.

Shoebox pointed to a CNN story that says that much of the $60 billion in tax dollars provided to both UAW Motors (nee Chrysler) and Government Motors (nee General Motors) will not be paid back. I’m shocked, SHOCKED to find this out.

Let’s review what happened to the money that went out the door:

– Something north of $13.4 billion from both the US and Canadian governments went to UAW Motors and its predecessor, Chrysler LLC, with $6 billion of that converted to senior secured debt held by the new UAW Motors, and an additional $2 billion spent to buy the assets of Chrysler LLC in exchange for 12.31% of UAW Motors (to be reduced to as low as 10% if Fiat meets certain goals). The remaining $5.4 billion, all unsecured debt, remained with Old Carco LLC, which will almost certainly run out of money and assets before it completes paying the $5 billion it owes its secured debtors.

– Somewhere around $50 billion went to Government Motors and its predecessor, General Motors Corporation, with $7.07 billion in Debtor-In-Possession financing converted to senior secured debt held by the new Government Motors and an additional $1.18 billion in DIP financing converted into a Wind Down Facility loan held by Motors Liquidation Company and given senior secured debt status. The remaining $42 billion was forgiven in exchange for the governments’ nearly-73% share in Government Motors.

The CNN story notes that the $5.4 billion given to UAW Motors is as good as gone. I haven’t seen any plans on how the US and Canadian governments plan to divest themselves of their stakes in the company, but I doubt they’ll get $2 billion for less than 10% of the company.

Meanwhile, The Wall Street Journal reported in July that Government Motors plans on having an IPO sometime in 2010, with full divesture in 2018. Does anybody believe they’ll get almost $42 billion for 73% of GM?

That does not address the possibility that UAW Motors and Government Motors will either dip back into the public trough or re-enter bankruptcy. In that case, even the secured debt might not be paid back in full.

The editorial writers at Investor’s Business Daily slice and dice the first significant post-bankruptcy move by Government Motors – “Cadillac, the new fragrance for men”. That’s right – if you can’t afford a new car, at least you can smell like one (or more likely, just plain smell).

Seriously, there are two GMs – the one that saw a 22% drop in sales for the first 6 months in the US, and the one that saw serious growth nearly everywhere else on the globe. GM sales in China grew by 38%, and sales in several Latin American countries set records. I do discount the market-share growth in Europe, as GM has shed or is about to shed its two major European brands, Opel and Saab.

The money quote from IBD – “We hope GM can survive in the U.S. But we rather doubt it can with a management that thinks that perfume will cover up the stink of political meddling and the lingering bad odor of its ruinous retirement and health care costs.”

Thanks to Sean Hackbarth, I was part of a conference call with Sen. Lamar Alexander (R-TN), discussing his plan to distribute the Treasury-held common stock in Chrysler and GM directly to the taxpayers within a year and his new Car Czar award. Since I managed to have my digital voice recorder working, I was actually able to grab a few notes from that. Of course, partly because of my natural quietness, and partially because of a heavy-hitter lineup on the call so experienced that even Fausta didn’t get to ask questions, all I can offer is a writeup.

• The Auto Stock for Every Taxpayer Act (S. 1198, no text available yet from THOMAS) would require the Treasury to distribute all of the common stock to the 120 million or so Americans who pay individual income taxes within a year of GM leaving bankruptcy (side note; Chrysler has now closed its “sale” to Fiat/UAW/US and Canadian governments and will henceforth be called UAW Motors on this blog).
• Sen. Alexander describes it as the fastest way to get the stock out of the hands of government, and brought up the example of the Green Bay Packers and its community-owned structure (Sean’s influence at work).
• The most-important thing is to stop the political meddling that results from government ownership, citing the White House-ordered firing of Rick Wagoner as CEO of GM, “suggestions” on where the HQ of GM ought to be, Rep. Barney Frank (D-MA) pressuring GM to keep a Massachusetts distribution center open, clamors from Congress on what models to make (do I hear Iowahawk’s Pelosi GTxi SS/RT Sport Edition?), the pay czar to “fix” the price of labor.
• The rationale to the taxpayers is, “You paid for it, you should own it”.
• As part of that, the Car Czar award, first given to Rep. Frank on Monday, will become a regular feature.

Of course, it wouldn’t be a conference call without questions. As I said, we had some heavy hitters.

• Noel Sheppard of Newsbusters started up with a two-parter: How will the inevitable calls from the Democrats to include non-taxpayers be addressed, and will the stock distribution will be based on population or percentage of taxes paid? Sen. Alexander hasn’t heard much from the Dems yet, but the principle is that we should give the shares back to those who actually paid for them. As for the distribution percentage, he acknowledges that a percentage-based would be better, but the population-based split would “give the little guy a break” and be “simpler and cleaner”.

  Side note – the Treasury would have roughly 310,000,000 common shares in “new GM”, and an unspecified number of shares equaling 8% of the membership stake (all non-voting) in UAW Motors, so a population-based split would be “simpler and cleaner”.

• Jennifer Rubin of Commentary Magazine and Pajamas Media wondered if the Chrysler and GM bankruptcies have changed the rule of law regarding private property owners. Sen. Alexander said that we’ve damaged the rule of law and the rights of private property owners. He pointed out that, in the future, private entities will be slower to lend money to enterprises and rely on contracts to pay the money back, and asserted that our system won’t “function very well” in that scenario.
• Travis Griffith at CarGurus.com asked about stock dumping by those that would get the distribution. Sen. Alexander notes that stock distributions happen all the time. The alternative would be for the Treasury to slowly divest over 5-7 years, and he expects the government to run both right into the ground before they can fully divest themselves.

  Side notes – I’d expect each invidiual 3-share stake in GM to be worth somewhere around $30 at the close (based on the $1 billion in VEBA funding the UAW is giving up for 17.5% of the common shares) and each individual membership stake in UAW Motors to be worth somewhere between $4 and $7 as of a couple hours ago (depending on which valuation method one uses). At the same time, the UAW will be looking to dump significant chunks of its holdings, which will depress the estimated values and limit the dumping.

• Stephanie Davis from RFC Radio wondered whether the political meddling would be extended to Ford. Sen. Alexander hopes not, and the faster the stock gets out of the Treasury, the less likely it is that Ford will be meddled with. He read off a long list of enterprises government has been meddling in over the last 9 months.
• Noel Sheppard asked about Sen. Alexander’s thoughts on the European rejection of their leftist leaders. Sen. Alexander pointed out he has been around a while, and he’s seen things change quickly. Europe has been at points in the past a leading political indicator of trends in the US, especially in right turns. Takeaway quote; “(T)he more the Obama administration practices politics of Washington takeover, the more wary Americans are going to be of one-party control in Washington, which is what we have today.”
• Somebody from RedState (interference on my DVR prevented me from catching his name) asked about the politicization of the Chrysler dealership closings (which took effect at the close of business yesterday). Sen. Alexander noted that the mere odor of politicization is reason enough to end the “incestuous relationship” of the government owning the car companies.
• Travis Griffith asked how often we can expect a Car Czar award. Sen. Alexander expects a couple a week because we’re in a target-rich environment. As part of previous answer, he mentioned that he might have to give one to himself for urging that the Spring Hill, Tennessee GM plant stay open.
• Missed who asked this one, but someone asked whether Sen. Alexander had any confidence that the government control of GM will be transparent. He’s hopeful that the demand for transparency will make GM the most-public private company in America, and that the pressure will get the Obama administration to get the government out of GM.

Sean said he would get a recording out to those of us who participated later, so I won’t inflict you with my very-low-quality version.

Revisions/extensions (12:49 pm 6/10/2009) – Ask, and ye shall receive. Sean came through with audio.

I haven’t completed my thoughts on the bill, but it definitely sounds intriguing. One item I haven’t seen addressed yet – the preferred shares that the Treasury will be holding.

Yes, there are a couple items, but not the big one that was expected today.

• The UAW ratified the revised deal that will make it take modest concessions and a $10 billion reduction of a scheduled $20 billion cash payment into the VEBA retiree health-care fund it will run in exchange for 17.5% of the common stock in the new Government Motors, $585 million per year in dividends from prefered stock worth $6.5 billion, and a $2.5 billion promissory note with scheduled payments of $1.38 billion in 2013, 2015 and 2017. What is really telling are some quotes from UAW chief Ron Gettelfinger:
  

  “I’m regretful that we had to do anything, and I think it’s a disgrace that we had to do anything,” he added.

  Gettelfinger declined to comment on criticism from other GM creditors that the restructuring will favor the union. “This is negotiations. You go in and you do the best job that you can,” he said.

  I would comment, but I don’t want to leave a profanity-laced tirade for my guest-bloggers.

• Speaking of the UAW, they’re getting a GM plant previously scheduled to close retooled and taken off the axe list so GM can build subcompacts here. Early reports were that they would be the next generation of the Geo Metr…er, overseas-only Chevrolet Matiz (renamed the Spark, with an 84-hp 1.2L engine replacing the 64-hp 1.0L engine), but others suggest the next-generation Chevrolet Aveo would also be part of the mix. If you think that, between the Aveo and the Metr…er, Spark, they’ll hit 160,000 sales per year, you’ve never driven either an Aveo or a Geo Metro. While I missed out on the Aveo, I did drive a Geo Metro once. To Chicago. With my younger sister and her boyfriend-at-the-time (it was his piece of crap). Talk about a frightening experience. I will never, EVER do that again.
• The bankruptcy judge is taking his sweet-natured time to approve the $2 billion sale of Chrysler to Fiat (with all proceeds going to senior secured creditors, who would get 29 cents on the dollar), with the US and Canadian governments seizing 75% of the new company and awarding a 55% stake to the UAW. That will be delayed until Monday, which will leave 15 days for the expected challenges to be resolved before Fiat walks away from that deal.

I won’t be here to find out whether that mythical percentage of bondholders fall for the bait-and-switch, or the actual terms of the 363 “sale” of GM to the government. I left instructions to the rest of the gang to try to keep up with that.