Wrong.
Most people don’t realize how much General Motors Company (NYSE:GM) actually took from taxpayers, and how little it’s given back. If I told you GM has repaid only $6.7 billion out of the $49.5 billion in loans it was given, would you be surprised? If I told you the expected loss to the U.S. Treasury of roughly $12 billion isn’t even a fraction of the real cost, would you believe me? If not, you might be in for a nasty surprise.
Bailout by the numbers
The Treasury plans to exit its entire holdings of GM by next April. By the end of this past March, the government had reclaimed just over $30 billion of its investment, leaving a substantial loss. While the government says it didn’t anticipate making a profit from saving the auto industry, the other $419 billion in TARP funds were 94% recovered — making GM a big loser. At today’s GM stock price, the Treasury looks to lose between $11 billion and $12 billion, unless the stock price changes drastically.
Yet that number doesn’t tell the whole story.
Consider that the only true loan General Motors Company (NYSE:GM) received from the U.S. government was for $6.7 billion at 7% interest, which it has since repaid. The majority of the nearly $50 billion was in stock purchases by the U.S. Treasury at a price that GM didn’t lose money when recently rebuying shares.
Also consider that General Motors Company (NYSE:GM) was “gifted” tax losses from the “Old GM” corporation in amounts of $45 billion. What that really means is the “New GM” can write off current profits up to that amount and not pay taxes on it. That’s a complete joke, in my opinion.
Think of it like this: GM took our tax dollars to save its company, and then after turning 13 quarters of profit, it still isn’t paying a single income-tax dollar. Are you kidding me? News flash: My recent taxes cost me and my wallet a bundle, and I didn’t turn billions in profit.
Too often people assume that since GM received nearly $50 billion in taxpaying funding, and when people hear GM has fully repaid its obligations we assume that means it repaid the said $50 billion. That isn’t further from the truth. GM has merely paid its initial pure loan of $6.7 billion with interest, and rebought some of its own shares from the U.S. Treasury – often at a cheaper price. Most of us taxpayers don’t even realize Ford Motor Company (NYSE:F) paid an effective tax rate of 26% in 2012, compared to 0% for General Motors Company (NYSE:GM) – a complete joke to Ford who didn’t take our taxpayer dollars.
Bottom line
If you read in my disclosure below, you’ll see I own stock in both Ford and GM. I own stock in both for completely different reasons. I believe Ford Motor Company (NYSE:F) to have excellent management and is way ahead of GM in operating efficiency and global consolidation of platforms – helping it create a net income off lower revenue. It’s also way ahead in creating value and quality in segment trends dominated by fuel efficiency – not to mention its F-Series is the best-selling truck for 36 years.
I own GM because my taxpayer dollar helped fund its lifeline – which they clearly are taking advantage of. If it gains a competitive advantage from wiping billions of debt from their balance sheet and will undoubtedly profit from it, I will also, only as long as I hold shares of GM before its stock price increases from using this advantage. I’m not advocating that you buy into General Motors Company (NYSE:GM), but only recognize what GM has truly taken from us taxpayers, and explaining the only possibility I see of you personally getting money back from it. Don’t expect a thank you note from GM anytime soon – even though every single American taxpayer deserves it.
The article How Much GM Truly Stole From American Taxpayers originally appeared on Fool.com and is written by Daniel Miller.
Fool contributor Daniel Miller owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford.
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