Will GM Get The AIG Treatment? « The Brian Sullivan Blog

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June 9, 2009 12:57 PM EDT by Brian Sullivan

Will GM Get The AIG Treatment?

Bus tours of GM and Chrysler execs' homes?   Angry marches through the bucolic neighborhoods of Bloomfield Hills, Michigan?

Let's hope not. But one wonders if GM will end up getting any of the same treatment so far reserved for AIG... given that it's entirely possible the bankrupt car company could replace the insurance company as the taxpayers' biggest debtor.

Consider it.

Today 10 banks said they will repay TARP funds.   The repayments total $68 billion, along with another $4.5 billion in interest.   The payments take many banks off the borrowing table, save for Citigroup and the $45 billion in direct TARP funds it borrowed.   The much-villified AIG has taken about $160 billion of taxpayer money (note: you see the $183 billion figure tossed around ... but that's just what the company has been authorized to borrow. To date it has actually borrowed just under $160 billion).

GM has taken $19 billion in direct aid and another reported $33 billion made available in bankruptcy financing.   $15 billion of that has already been tapped, and with $172 billion in debts it is likely GM will be forced to use all of that money, if not more.    Even if no additional money is authorized by the courts it would put the GM taxpayer tab at about $42 billion bucks ... more than any company not named AIG or Citigroup.   Citigroup would then only have to pay back $3 billion to knock GM up to #2 on our national corporate debtor list.

And it's possible GM could move up to number 1.

AIG - despite being arguably the most disliked company in America - has a very real fundamental insurance business. It remains number 1 or number 2 in every segment of the insurance industry it participates in. While the financial products business of AIG has been decimated, its core insurance business remains strong.    While it doesn't get much attention, there is some real value in many parts of AIG and valuable assets to sell.   AIG has already said it will sell off many of those to raise money and repay taxpayers.    Former AIG CEO Ed Liddy recently said the company believes it can pay all the money back.

While AIG works to pay back the government, GM moves in the opposite direction and may face even more problems down its well-potholed road. On the show today, Rasmussen Reports Scott Rasmussen revealed that his latest poll indicates a whopping 43% of GM car owners say they will never again buy another General Motors car! Much of that may simply be angry reaction to the still fresh GM bankruptcy news, but it still doesn't portend well for GM or taxpayer.    The company is already losing money and prospects for paying back the taxpayer cash are low at best.   If GM were to lose yet more market share it would be devastating to the company's already broken finances.    The ability of a money-losing company to pay back anything it owes - especially to what will be a very soft creditor in the U.S. government - is small at best.

Citi pays back a few billion.   AIG sells some assets and uses proceeds from its moneymaking core insurance business and pays down much of what it owes to the taxpayer.    GM meantime continues to lose market share and money.    The bankruptcy court must authorize more government-lent debtor in possession financing.    The debt grows.

While there is still a long way to go before "catching" AIG's big taxpayer debt load, GM is certainly on its way.    And if it happens, can GM expect an AIG-like reception? Or will the same pro-big labor groups who helped organize the AIG bus tours save their anger only for non-union companies?

8 Comments

moving

Gm will not be made a vilian as AIG was unless it serves the administrations current goals. I believe the whole AIG bonus thing was a head fake to draw attention to the millions of dollars in bonus money and hide the billions of dollars in payments to the likes of Goldman Sacks. It's funny how "upset" people were at the smaller amount of money paid in bonuses and no one really even talked about the hughe amount of money banks were paid through AIG. Even more funny is how those banks that recieved billions through AIG back door magically have billions to "pay back" the TARP program...himmmmm? I guess banks are used to using other peoples money so in a way this whole financial loop de loop is nothing new. No GM is a "good" bad guy because it can be used for social/green engineering that can be put to work through the "car zar" and new "board" which will be a Obamas board and it will be uaw controlled. The new bad guy will be Ford or Toyota or some other non TARP funded gov't controlled car company. If I was with Ford upper management I would watch my back :)

June 9, 2009 at 1:45 pm

chuck

What has crossed my mind is this: will GM secure bondholders through a monkey wrench into this like Chrysler Dailmer pensioners did with the Supreme court?

June 9, 2009 at 2:52 pm

Corey in GA

How can anyone possibly blame the wonderful unions and any company that employs union labor? After all, this is the basis of the middle class where single income high school educated people can support a family in a spacious 4 bedroom household with a second lake home while 2 income college educated households get by with only the 4 bedroom household! The new "Made in America" push will be "Made by someone who isn't taking my tax money for their absurd income!!" I look very fondly on the Toyota and Honda in my driveway. That's right, UAW, they're in my driveway, not in the shop getting lemon repairs!!

June 9, 2009 at 3:15 pm

K. Trout

..Why are top selling GM dealerships being forced out of business??....Where's the investigations??....I live here in Bloomfield Hills, Birmingham is a small upscale town just down Woodward Ave. Auto engineers and such live in Birmingham, Big 3 Honchos live in Bloomfield Hills....

June 9, 2009 at 4:01 pm

"Em

I agree. Where is the outrage over $50B with no payback requirement. I guess my outrage will continue through car purchases. All the talk of GM caused us to reflect on our car purchases through the years. Out of 15 cars, only 3 were "American". Where is the jubilation over money being made off of the TARP Banks. (Ugly as this episode has been) Bravo to the the svengali's in Washington who have managed the public opinion soooo well!

June 10, 2009 at 7:04 am

(1 Reply)

andyK

All this fiasco was just smoke and mirrors. They don't want us to see whats really happening so they start a new crisis or uproar. This regime in power and yes its a regime not a party cant be trusted. This includes the GOP also. To little to late GOP. We have been fighting regimes for a hundred years in other countries to make their lives better and now we have our own building in our back yard. The government cant deliver the mail on time or without losing money, but they think they can be bankers, insurance agents and auto manufacturers. We will see how smart the American people are next election. If the people don't vote accordingly then I guess we all deserve what we get. And for all these csars, when did we become Russia

June 10, 2009 at 7:51 am

Alice

No Surprise that GM had to sink like the Titanic.. Just the pain and hard work of 300 Million Taxpayers going down the drain.. Whose responsible for that?

June 15, 2009 at 11:38 am

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Brian Sullivan joined FOX Business Network (FBN) in April 2008 as an anchor. He co-anchors the 10am-12pm ET hours of the FOX Business block. Prior to joining FBN, Sullivan served as an anchor for Bloomberg Television where he hosted the programs Morning Call and In Focus.
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Will GM Get The AIG Treatment?