Obamas Hidden $18B Gift to GM: Stuffing Dealer Inventories and GMs Biggest Profit in 100 Year History

Shafting Ford and taxpayers as GM receives the gift of an $18 BILLION tax credit. Obama announced the biggest profit for GM in its 100-year-history, BUT…dealer inventories loaded with an 89 day inventory (channel stuffing). GM back to old tricks.”

Wall Street Journal: Corporations in the red, as GM was for years, are allowed to carry forward net operating losses that reduce their future tax liability when they are making money. GM had accumulated about $45 billion in such profit-shielding chits by 2008, with a book value of about $18 billion. When companies enter bankruptcy, carry-forwards disappear or are greatly limited under IRS section 382, which kicks in when ownership changes by more than 50 percentage points…

So when GM entered bankruptcy in June 2009, the government swapped the debt the auto maker owed it as a creditor for 61% of “new GM,” while handing another chunk to the United Auto Workers. But new GM also inherited the accumulated net operating losses that would have turned into a pumpkin in normal bankruptcy.

In a 2011 working paper, J. Mark Ramseyer of Harvard and Eric Rasmusen of Indiana University argue that by manipulating corporate tax rules by fiat, “Treasury gave the firm (and its owners, including the UAW) $18 billion more in assets.” Thus a Democratic Administration gave “a massive tax benefit to one of the party’s biggest supporters.” The other problem is that the move put Ford and GM’s other competitors at a disadvantage, as bailouts always do. Read more.

ZeroHedge 2-1-12 – see the tale-telling graph here:

…we learn that in addition to car sales declining by 6% compared to a year ago, at 167,962 vehicles sold (of note: “Retail deliveries declined 15 percent compared with the same month a year ago and accounted for 70 percent of GM sales”), it was the all critical month end dealer inventory that caught our attention.

And unfortunately as the skeptics expected, GM is back to its old tricks, as dealer inventories rose once again, this time by over 36k units, or the second highest in its post-reorg history, to a near record 619,455 vehicles stored with dealers. This is just the second highest ever in fresh start GM history, second only to November’s 623,666. The January-end number represents 89 days supply, but more importantly the recent spike in restocking, which was seen with all other major car dealers, explains the ongoing “expansion” in the US economy as measured by indices such as the ISM.

With Obama boasting of GM’s highest profits in it’s 100-year-history, whatever the truth, we remind him that GM still owes taxpayers at least $25 BILLION, and there that’s hidden $18 BILLION that even the Wall Street Journal missed for awhile. We haven’t forgotten shareholders who lost everything – their share price, their retirement, their health insurance, maybe their homes, surely their peace of mind. Read about the autoworkers left behind here.

UPDATE 2-29-12: From the Desk of Lady Liberty pointed me to this headline on Primary Day in Michigan: Car sales booming, factories hiring more workers.  Three kind of lies: Lies, Damned Lies and Statistics! Let me tell you about Lady Liberty, she has some of the best news aggregation – everyday – that you will find anywhere. Here’s an example. And then she has feature stories, like this one: FLOTUS hits North Carolina. LL has a special wish for her – that the Military she plans to address gives her what she and BO deserve for hiking Military health care premiums.

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Posted by Maggie @ Maggie’s Notebook

  • Lately, I can’t get ANY American car dealer to cut me a break on the purchase of a new car. No problem getting Hyundai to cut a deal, though.

    • Bookdoc

      Then you need to find a new dealership. I sell at a GM dealership and we are cutting deals like crazy. We will set a record for February. Yesterday, I got a trade upped by $2200 to close a deal and we did a below invoice deal on a hot model on another.

      • When does GM begin paying back the $25M. You’d think that might happen before they started contributing to charitables again (including the Democrat Party) – but that’s not the case. What about the those shareholder who lost EVERYTHING.

        If you ‘sell’ there, but don’t handle the books there, you might want to count the vehicles on the lot and see what you come up with.

        Bookdoc, I’m glad you have a job, but this gets my blood boiling.

        • Bookdoc

          I don’t work for GM. I work for a very hardworking small businessman who is here every day taking care of customers. As to inventory, we’ve been begging for more as we are selling plenty of cars. Channel stuffing may be going on but we haven’t been forced to take anything. By the way , we inventory weekly…

          • Bookdoc, I understand and am glad your company is doing well. Good also that your inventory is normal. I have no complaint with the individual business man, I just don’t like GM and don’t like how they are doing business, and really really am disgusted at the Union giveaways at the expense of so many people.

            • Bookdoc

              I have to agree with you about obozo’s actions in setting up the GM bankruptcy. They screwed the secured bondholders to take care of the unions and the uaw is still trying to destroy the industry while enriching the union leaders. That said, I have been selling here for a while and would not be able to take my regulars with me. We also, as a Buic store, have some pretty exciting stuff to sell. I wish GM had gone through a conventional bankruptcy that would have allowed voiding the union contracts and giving it a real chance to succeed without being under the uaw and obozo’s thumbs.

              • Bookdoc, I think the whole country is wishing for that bankruptcy. American would be behind their comeback, no matter how unfortunate the circumstances. As it is, they look like freeloaders. What happened with the Unions is unforgivable. I wish you and your company every success.

  • There are no words to describe Obama’s Anti-Christ illegal dirty tricks. Does Obama have someone to write his checks fast enough? The White House never sleeps at scamming the American people 24-7. Madoff doesn’t hold a candle to Obama, who BTW is of his father the Devil. WHAT NEXT? DAMN!

  • I noted this headline the other day running conveniently on Primary Day in Michigan:
    Car sales booming, factories hiring more workers


  • This has to be illegal; but don’t expect the IRS to say a word.

    • Jim, had the WSJ not found it, we would have never found out.

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  • Thank you for the very kind words, Maggie!
    My mission is to inform and connect the dots — I am glad I am making that happen for some folks!

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