General Motors

When GM filed for Chapter 11 Bankruptcy it did not follow the normal procedure whereby bond holders and preferred stock holders would be given preference on remaining assets. Instead the federal government intervened with cash and demanded certain changes in the regular court process. The most significant was giving the union a 17% ownership in the company in lieu of payments to bondholders. While I personally would be more concerned about the employees than the bondholders this does not bode well for future GM bond sales. Another unreported difference in this filing was how past losses will affect future profits. In a normal situation companies are allowed to carry forward past loses and apply those to future profits thus reducing taxes owed. When a company files Chapter 11 they lose this right but an exception was made for GM and they will be allowed to carry forward losses for 20 years which means they will likely pay no tax for the next 20 years. It is not possible to figure the loss to taxpayers since no one knows how successful GM will be but we do know that much of their profits come from operations outside of the US. We do know that GM made 7.6 billion in profits for 2011 and owed zero tax because of the carryover exception. They actually got a 110 million dollar refund and was able to pay a $7,000 bonus to each employee. Just where does GM stand at this point/ As of February 2012 General Motors has only paid back Uncle Sam $26-billion of the $49.5-billion in bailout money they received. They also accumulated $13-billion in stock losses and reported record profits of $7.6-billion in 2011. This means that for every $1 of profit, the U.S. government paid $4. Taxpayers also spent another $27-billion to buy General Motors stock and currently own about 30% of the company in stock. 47,500 blue-collar workers will be receiving profit sharing checks of up to $7,000. Jack