GM And Chrysler Investing Additional $1B In US Auto Manufacturing

GM And Chrysler Investing Additional $1B In US Auto Manufacturing


The move will save nearly 2,500 jobs.

From The Street:

Hard-hit Kokomo, Ind., got a big boost from Chrysler on Tuesday when the automaker announced it plans to pump another $843 million into three factories to build a new front-wheel-drive transmission.

General Motors, meanwhile, will announce Wednesday that it will invest $163 million in two Michigan plants and an Ohio foundry to make small-car engines, according to a person familiar with GM’s plans. The person was not authorized to talk about the plans ahead of the formal announcement and asked not to be identified.

But wait, there’s more from Chrysler…

Chrysler said the new investment, to start early next year and run through the third quarter of 2012, would raise the company’s commitment to the Kokomo plants to $1.1 billion, pushing its total U.S. factory investment to nearly $3 billion since it emerged from government-funded bankruptcy protection in 2009.

And everybody heard that GM IPO’d this week, right? And it was the biggest IPO ever?

More as it develops…

  • Tully

    So, the taxpayers sold 42.6% of their 61% stake in GM for $11.8B, which would be a LOSS to the taxpayers of a mere $9.5B on that portion of government-held shares sold. And a sale price of $55+/share required on the remaining government-held shares for overall break-even … asssuming no future stock dilution, and the break-even price being figured in real dollars not counting any past/future inflation and not accounting for any interest/opportunity cost on the holdings. And of course asssuming no broker’s fees or commissions, issue discounts, etc., on the shares sold. (And we know that ain’t so.)

    I could’ve sworn someone around here assured me that “we the people” would make a profit on any sale of “our” GM stock this year.

  • kranky kritter

    Can anyone tell me where these shares that the government JUST sold initially came from? Did GM issue special stock representing a large stake in the company in exchange for the government money, thereby drastically diluting how much of a portion of GM that existing shares represented?

    Seems to me that’s the only way that GM itself could have gotten money to help itself while Uncle Sam ended up owning half the company for a time. Unless GM the corporation owned itself.

    I am probably a moron for not knowing this, and maybe I’m missing something. Can anyone explain?

  • Tully

    It’s complicated, but … as simply as reasonably possible:

    Old GM is just a shell. Old GM went bankrupt. New GM “bought” the good assets of Old GM with government “loans” backed by stock representing about 61% of New GM. The Queen of Canada got 11.7% on behalf of Canada and Ontario (Canada also “loaned” New GM money) and the UAW got 17.5% for its benefits trust. The remainder went to unsecured creditors of Old GM (both suppliers and investment bankers). New GM moves forward without the liabilities of Old GM — except of course for their obligations to the UAW, which passed on INTACT. Indeed, UAW profited on the deal by gaining that 17.5% stake.

    The 61% US gov’t common stock has (had!) a theoretical value of $45B. They just sold a bit under half that stake at a stock price that (assuming zero transaction costs, fees, commissions, etc., which we know ain’t so) locked in a minimum $9.5B loss on that portion of the stock. Actual loss is likely over $10B. Realistically, to break even on the stock the gov’t will need to unload the remainder at nearly double the share price of this IPO, and do so within the next 18 months or so.

    Shareholders in Old GM get to squabble over any fractional residue of value attached to that Old GM stock, of which there is NONE after miniscule fractional payments are made to dis-enfranchised franchisees and secured creditors. In short, Old GM common stock is now worth precisely zero. If you had any, that means you now got nada. You have no ownership in New GM.

    The bankruptcy was “non-standard,” having been strong-armed by the Obama admin in such a way that secured creditors and some franchisees got royally screwed by being forced to the back of the line, while certain favored unsecured creditors who would have been SOL in an ordinary bankruptcy got compensated with new-company stock. And of course the UAW, which in the ordinary course of a bankruptcy would have taken a heavy beating along with ordinary creditors, actually came out ahead.

    I don’t know why major banks have become so reluctant to make “secured” loans to large companies of late. Got me. No sirree. It’s a total freaking puzzle. Can’t figure it out at all. I’m sure uncertainty about punitive future tax rates and inflation and heated anti-corporate rhetoric from the administration and such also plays no part at all in corporate reluctance to crank up US operations in the face of a slack economy. Of course not. Who could ever think such a thing?


  • Jim Satterfield

    Tell me, Tully, when did you become such a big fan of Rush and Beck? Where is the heated anti-corporate rhetoric? I know that in Republican-land any taxes on corporations or the wealthy are punitive, but when did you move there? Exactly who has proposed punitive tax rates? No one. Who has suggested that someone will? The paranoid fruitcake wing of the right. Uncertainty about inflation and health care costs have been part of the corporate environment for decades just because of cost increases (often huge ones) imposed by the insurance companies, yet somehow it’s suddenly Obama’s fault. What crap is being shoveled by the right wing.

  • Tully

    Jim, you really should get an orthopedist to look at that knee. I could hear it jerking from hundreds of miles away. As always anyone who is not as far left as you (a substantial majority of the nation) is automatically labelled as “right wing.” And as always the light-speed jump to ad hominem rather than addressing the issue, which is GM. I’ll pass on returning in kind, save to note that name-calling and such is strongly indicative of a lack of any substantive reply … among other things.

    “Anti-corporate” and/or “anti-business” as descriptors of the Obama admin and the Dem majority I get from such paranoid fruitcake rightwing publications as The New York Times and the Washington Post. I’ve certainly not heard any business owners calling Obama or the Dem-majority Congress pro-business for the last year and a half. No doubt some companies on the receiving end of the recent Pork Parade might find the current Krewe pro their business, but that’s another story, a rather bipartisan tale that seems to go on regardless of who’s in charge.

    “Punitive” is already a fair description of US corporate tax rates before one starts figuring out the additional load from legislation such as ObamaCare and Cap & Tax — we have the 2nd-highest overall corporate tax rate in the world, just behind Japan’s. Increasing the taxation and regulatory burden is not a positive stimulus to investment. (It is however a positive stimulus for capital flight.)

    And yes, no matter how much diversionary ranting you do, the taxpayers LOST $10B or so on the sale of GM stock. That’s without getting into the $17+B that GMAC is into the government for, of course. Or the remaining New GM stock the government’s holding.

  • Jim Satterfield

    Tully, like it or not your posts for the last several years have in fact moved further and further to the right. Look at your comment about corporate tax rates. How fact free can an argument be? While it’s technically true, by the time all of the deductions, tax loopholes and shelters are used it’s utter crap, otherwise companies with billions in profits wouldn’t be paying no taxes by the time all is said and done. If you’re really interested in honesty you couldn’t make that RNC approved argument. Talk about knee jerking. And look at what that wonderful low tax rate has bought Ireland. Nothing in terms of long term good for their economy.