Sure and the U.S. Treasury didn't even see the melt down in subprime and other financial markets!
Published Sunday May 31, 2009
'Optimistic' view sees GM revival within five years
THE WASHINGTON POST
WASHINGTON — The United States would recover most of its planned $50 billion investment in General Motors within five years, according to a preliminary Treasury Department estimate that foresees the company, now on the brink of bankruptcy, rebounding over that time to become a strapping global competitor.
By putting billions of dollars into the ailing automaker, the Obama administration has placed a huge bet on the effort to revive and streamline the company through the elimination of brands, dealerships and factories.
On Friday, the company's union announced that it had approved a cost-cutting contract, and GM reached an agreement to sell its Opel brand.
If the government-monitored reorganization fails, however, the government investment into the company would be lost.
Some industry analysts are skeptical that an automaker that has struggled for so long could be so quickly reborn. The preliminary estimate, by contrast, reflects optimism.
"I don't know how much we're going to recover," one administration official said on the condition of anonymity. "I'm not here to tout stock. But we're very excited about this as a company."[snake oil salesman]
After a planned GM bankruptcy, during which the company will seek to shed burdensome debts, the U.S. and Canadian governments will own 72.5 percent of the reorganized automaker. In addition, GM will owe the U.S. about $8 billion. [THE PENT UP DEMAND FOR AUTO'S ISN'T BIG ENOUGH TO DRAG GM BACK FROM THE THRESHOLD OF EXTINCTION!]
The United States could recover most of that investment by 2013, when, sources said, a Treasury projection shows the company would reach an equity value of $75 billion.
The government share, by then slightly diluted, would be worth about $46 billion. The $8 billion debt would have been repaid, and the government would have reaped billions in preferred-stock payments. Sources said the estimates are constantly being refined.
Brian Bethune, chief U.S. financial economist for IHS Global Insight, called the assumptions "extremely optimistic" given the risks in the economy and the challenges facing the company.
"This is not a nip-and-tuck exercise. This is major surgery," he said.
Among the key variables in any such forecast is the number of new cars sold annually in the United States.
During the boom years, the annualized figure for car sales in the U.S. hovered around 16 million. Recently, it has fallen to between 9 million and 10 million.
In regulatory filings, GM has estimated that the market will rebound to 16 million by 2012.
Those filings also assume the GM market share will slump slightly between now and 2012, to 18.4 percent from 19.5 percent, presumably because the company will offer fewer brands.
"It's not a completely unreasonable estimate — if the market recovers and if they really invest in GM's capabilities," said Susan Helper, an economics professor at Case Western Reserve University who specializes in the auto industry.
So far, the United States has invested $20 billion to keep GM in business and would contribute about $30 billion as part of a bankruptcy restructuring. [SO MUCH FOR THE FREE MARKET ECONOMY!]
