Free Markets, Free People

GM to pay 400 million in bonuses without loans being paid back … where’s the left on this?

Giving the left the benefit of the doubt, maybe they didn’t know about this.  Because I’m sure, just as they blasted Wall Street for paying bonuses after receiving bailout money and TARP funds, they’d be keen to be consistent and do the same to GM.

Less than two years after entering bankruptcy, General Motors will extend millions of dollars in bonuses to most of its 48,000 hourly workers as a reward for the company’s rapid turnaround after it was rescued by the government.

The payments, disclosed Monday in company documents, are similar to bonuses announced last week for white-collar employees. The bonuses to 76,000 American workers will probably total more than $400 million — an amount that suggests executives have increasing confidence in the automaker’s comeback.

But the comeback was and is still financed by taxpayers money and borrowing.  What in the world is GM doing paying out bonuses when it still owes at least $40 billion in loans?  That $400 million would be a nice chunk toward that payback, wouldn’t it?

But the bonuses drew criticism from an opponent of the auto industry bailout in Washington who said GM should repay its entire $49.5 billion loan before offering bonuses.

"Since the taxpayers helped these companies out of bankruptcy, the taxpayers should be repaid before bonuses go out," said Republican Sen. Charles Grassley of Iowa. "It sends a message that those in charge take shareholders, in this case the taxpayers, for a sucker."

Yeah, kind of hard to argue otherwise, isn’t it?  And no, for you that believed all the hype, GM hasn’t paid back its loans despite the commercials it made claiming it had.  It isn’t even close to paying them off.

That said, I’m sure, once the story gets out that the left will be just as consistent in slamming GM for paying bonuses without repaying its loans as it was with taking Wall Street (properly I might add) for precisely the same reason.  (HT: Maggie’s Notebook).

Oh, and by the way:

Ford Motor Co. announced plans last month to pay its 40,600 U.S. factory workers $5,000 each, the first such checks since 1999. The Dearborn, Mich., company, which avoided bankruptcy and did not get a government bailout, made $6.6 billion last year.

Ford also plans to pay performance bonuses to white-collar workers in lieu of raises, but it would not reveal the amounts.

Good for them and congratulations.

~McQ

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18 Responses to GM to pay 400 million in bonuses without loans being paid back … where’s the left on this?

  • Watch out, this could turn out to be another one of Obama’s Munchhausen-by-proxy moments.

  • This is part of a shift of pay for performance.  Instead of raises, performance based bonuses were given. 

    If the company did poorly there would be little to no bonus and no raise either. 

  • GM paid back all its ‘technical’ debt with the government.  It doesn’t owe the government another dime in a legal obligation sense.

    Instead of loans, which what GM originally sought, this administration took an equity stake, instead.  If the government is not making its money back from that equity stake (which at the current price is likely to fall 10-15 bln short), its the fault of the way the administation structured GM’s bankruptcy financing.  Should GM make up the shortfall?  In my personal opinion, they should.   

    • No – it didn’t. It borrowed from a TARP escrow account to pay back TARP. See the link in the story.

      • Actually there have been more pay backs than that money.  The “shell game” people were complaining about was that they used cash from the cash for equity money to pay back the TARP loan.  Then they paided that back implying it was paid back by profits which wasn’t reflective of reality at the time.  On the other end of the spectrum people distorted what happened to try to imply new money from the government was involve.  It wasn’t. 

        • Let me correct that.  It still wasn’t new money.  But the source was TARP funds that had been allocated which they hadn’t drawn upon yet.  So they basically were waving off some of the TARP money they were allocated in the beginning and oversold what it meant. 

          • They’re not waving it off if they took it and used it to repay anything.
             
            Waving it off is doing just that, leaving it there.  They don’t get to borrow $100.00, use $50.00, take the remaining $50.00 to pay back the $50.00 they used, and then claim they now owe nothing.  They borrowed $100.00, I don’t care if they used it on hookers and cheap booze, they owe $100.00 at the end of the day.
             
            Equity?  In a company that should have gone into receivership?  What was the ‘value’ of the equity we received as taxpayers?  I haven’t noticed my share of taxes going down as a result of my ‘equity’ in GM.
             
            There’s no excuse for $4k bonuses in this economy, not from an entity that borrowed it’s bonus capital from the American Taxpayer.

          • Escrow money was money already allocated to GM. 

            So that’s not what they did.  They borrowed $100, drew $50, paid (or turned back) the other $50, then paid the first 50.  Its almost a year after that article. 

            As for equity, you recieved about 60% of GM Stock.  Don’t like it, send a letter to Obama.  Tell him he never should have given them money or should have done it different.  No corporation is going to commit Seppuku if there’s a lifeline available. 

  • heh – yeah, except the story has been out for a couple of days – and I note a significant lack of outrage so far.

  • People…!!!  It is THEIR GM now.  You will NOT see Fat Mikey Moore with a camera, sticking it in the faces of UAW princes.
    These are the MORE equal pigs.  Just get used to it…!!!  Obama took all that mean “market” thingy out of the equation!
    You DID get that GE bought a fleet of Volts…using YOUR money in the form of the subsidy, right???

  • What was the UAW’s cut of this?

  • Good!  I suppose you will speak out against the ghastly bonuses big business pay in the US, a country where the middle class has become the underclass:
    http://money.cnn.com/2011/02/16/news/economy/middle_class/index.htm

    • There’s a part of me that finds those massive payouts fairly offensive, but I also understand that a company that controls its own destiny should have the freedom to do as it wishes and deal with the consequences.  I think it’s quite different when the company in question is one that so badly managed itself that it was about to go bankrupt.  But this seems like a different situation anyway.  GM (and other automakers) appear to be making these payments in lieu of pay raises.  I’m thinking that for workers, this deal isn’t as good as it seems on the surface.  Then again, it beats being unemployed.  For GM, it could leave them with a bit more cash in the long run, which would help to pay off those loans that they owe us.
       
      One thing to keep in mind, though: the Time article has a quote from an industry analyst claiming that the bonuses were necessary to keep workers from jumping ship to rival automakers.  So it may be less about recovering and having a great year and being on the road to success, and more about trying desperately to keep their heads above water.  And if GM is struggling to keep employees from leaving when they still have tens of billions of dollars to repay in loans, then this doesn’t look very encouraging at all.

      • Of course the bonus argument is the same argument Wall Street used concerning its employees and was roundly panned for it.

        Secondly – whether it is or isn’t a better deal for employees is irrelevant in my book. The taxpayers, unwillingly, saved their jobs. Until those who saved the jobs are paid back, I really don’t care what is or isn’t a better deal for the employees.

    • your argument is fallacious.
      McQ’s point is that GM owes money to the taxpayer that is clearly not going to pay and instead it is paying bonuses to execs that clearly do not deserve them.  And they don’t deserve them because GM is bleeding out.
      On the other hand if the company was doing well, and did not owe money then they should be paid handsomely since they are clearly creating value.