Thread: Will GM Spend Taxpayer Bailout Money on Overseas Operations?

Taxpayer funded Stimulus sends more American jobs to China...


http://abcnews.go.com/Politics/general- ... id=9091248

Will GM Spend Taxpayer Bailout Money on Overseas Operations?

U.S. Operations Received $50 Billion in Taxpayer Funds -- And Now May Send Millions of Dollars Overseas

By JAKE TAPPER and MATTHEW JAFFE
SHANGHAI, CHINA, Nov. 16, 2009—

At a meeting with President Obama Monday morning, Communist Party Secretary Yu Xheng Sheng told the U.S. president how well General Motors' Chinese division was doing.

"The business of GM in Shanghai is pretty good," Secretary Yu told the president. "By the end of October this year their sales has increased by 40 percent over the same period of last year. I think that the fantastic performance here in Shanghai is definitely a boost to their business in the United States."

"Absolutely," said President Obama. "I think they can learn from their operations here in terms of increasing sales back in the United States."

But some critics wonder if GM is a little too focused on its international operations.

Specifically, at a time when the nation's unemployment rate has soared to levels not seen in decades and GM is cutting thousands of U.S. jobs, the company's CEO is considering spending millions from its U.S. coffers -- fattened by $50 billion in taxpayer aid -- on its overseas operations, a possibility that has outraged critics and lawmakers.

"I don't think most Americans believe that when the taxpayer bailouts were happening it was intended for that purpose," said Rep. Anthony Weiner, D-N.Y. "It was intended to protect the American economy -- not take the money overseas."

GM today reported that it lost $1.2 billion in the third quarter, from the time it left bankruptcy protection through Sept. 30.

GM's Chief Executive Fritz Henderson recently announced that the bailed-out automaker might use its U.S. funds to help restructure its European unit Opel, noting that the financing agreements with the Treasury for the $34 billion of bailout funds already spent allow GM to spend any subsequently earned funds as its executives see fit. Some $16 billion remaining after its bankruptcy has strings attached.

In a world where funds are fungible, where GM has yet to repay the $50 billion bailout, and where GM only remains in existence because of those bailout dollars, critics argue sending these funds to Europe is essentially the same as sending taxpayer dollars overseas.

"We certainly need to be prudent about it, be very careful about it, but we do have the ability to run a global business," Henderson told reporters earlier this month.


GM has other plans to expand its business abroad. In August, GM China announced a $293 million venture, while last month GM South Korea announced a new infusion of more than $400 million. The automaker also recently inaugurated a $300 million transmission plant in Mexico.

The reasons for international expansion are obvious -- Asia, for instance, is the fastest-growing economic region in the world, forecast to grow at a 7 percent rate next year.

A GM spokesman noted that the best way for the Detroit automaker to repay American taxpayers is to be strong internationally.

"As much as some people might wish that it were not so, the reality is that the auto industry is global, and no company can survive without a strong global presence," said GM spokesman Tom Wilkinson. "Any dream of a U.S.-only carmaker is just that: a dream."

Wilkinson said "the exit financing agreement for the new GM does permit some money earned by GM here to be used for non-U.S. operations."

The Treasury Department declined to comment on whether it was appropriate for GM to send money from its U.S. accounts to shore up its European operations.

Wilkinson said Treasury "realizes that the best way for taxpayers to maximize their return is for GM to be a strong, healthy company."

Others say that while it may be legal, that doesn't make it right.

"I don't believe that it is consistent with the original objective so I would say it's not wise or helpful that our taxpayer dollars are being used to support the global efforts of these companies," said Thomas Hopkins, professor of economics at the Rochester Institute of Technology.

Said Rep. Weiner, GM "might legally have the right to do this, but politically and from an optics perspective I can't imagine a more boneheaded move."

When President Obama announced his plan to send GM into bankruptcy, he pledged an initial $30 billion of taxpayer aid to help the automaker emerge from the process successfully, casting the investment as a way to save American jobs.


"GM is an American company with tens of thousands of employees in this country, and responsibility for its future ultimately rests with us," the President said June 1 at the White House. "That's why our government will be making a significant additional investment of about $30 billion in GM  an investment that will entitle American taxpayers to ownership of about 60 percent of the new GM."

It is precisely that 60 percent ownership stake that could make American taxpayers open to GM doing whatever it takes to be successful and eventually repay its bailout funds, even if that means expanding abroad.

"GM is trying to make a profit," said Dan Ikenson of the Cato Institute. "They know best how to do that. We should not infringe on their decision-making."

However, a government watchdog group recently warned that it was "unlikely" that American taxpayers would receive a full return on their investment in GM.

"Treasury is unlikely to recover the entirety of its investment in Chrysler or GM, given that the companies' values would have to grow substantially above what they have been in the past," the Government Accountability Office said in a Nov. 2 report.

Speaking in Washington last month about GM's future prospects, Steve Rattner, the former head of the Obama administration's auto task force, said, "Like any patient that undergoes major surgery, a successful recovery is far from assured."

On Monday morning GM will release its third-quarter earnings report. Sources familiar with the announcement told ABC News that the automaker will state that it aims to repay taxpayers $1 billion per quarter, starting in December.

ABC News' Dan Arnall and Jessica Hoffman contributed to this report.

Copyright © 2009 ABC News Internet Ventures

"As much as some people might wish that it were not so, the reality is that the auto industry is global, and no company can survive without a strong global presence," said GM spokesman Tom Wilkinson. "Any dream of a U.S.-only carmaker is just that: a dream."

Really? Next time they need a bailout...tell them to ask the "global community" for the money, not the US taxpayer. In the future only companies that hire only American workers should be eligible for bailouts. They should pay back this money immediately. And dont ask for more.

Originally Posted by redpony353

"As much as some people might wish that it were not so, the reality is that the auto industry is global, and no company can survive without a strong global presence," said GM spokesman Tom Wilkinson. "Any dream of a U.S.-only carmaker is just that: a dream."

Really? Next time they need a bailout...tell them to ask the "global community" for the money, not the US taxpayer. In the future only companies that hire only American workers should be eligible for bailouts. They should pay back this money immediately. And dont ask for more.

But, but, but...