Free Markets, Free People


GM buys into Peugeot, sucks up $400 mil in “junk bonds”

Ed Morrissey sums up the “new” GM:

Americans sunk tens of billions of dollars into General Motors in 2008 and 2009, money which they won’t see any time soon, if at all.  The Obama administration strongarmed senior creditors in an unprecedented politically-engineered bankruptcy to get taxpayers to eat the costs of old pension obligations and boost the UAW.  All of this was done in the name of making GM a stronger company so that they could eventually pay back the bailout and make better decisions in the future. [emphasis mine]

Remember the other day when I talked about corporate cultures and how it was important to change them when a company is going down the tubes because of their present one?  And how bankruptcy – real bankruptcy – has a tendency to help make that corporate culture change a reality.

Yeah, well that didn’t happen at GM with predictable results:

Attention U.S. taxpayers:  You now own a piece of a French car company that is drowning in red ink.

That’s right.  In a move little noticed outside of the business pages, General Motors last week bought more than $400 million in shares of PSA Peugeot Citroen – a 7 percent stake in the company. …

Peugeot can undoubtedly use the cash.  Last year, Peugeot’s auto making division lost $123 million.  And on March 1 – just a day after the deal with GM was announced – Moody’s downgraded Peugeot’s credit rating to junk status with a negative outlook, citing “severe deterioration” of its finances.

In other words, General Motors essentially just dumped more than $400 million of taxpayer assets on junk bonds.

[…]

An analysis by auto industry consultants IHS said it is “somewhat baffling that GM is willing to get involved in an alliance that it frankly does not need for size or complexity, while still avoiding any public plan to rationalise its European production, cut costs, or deal with labour rates.”

Well, the investment in Solyndra was “somewhat baffling” to most analysts, but it didn’t stop the Department of Energy from guaranteeing it, did it?

GM needs a 7% stake in Peugeot like it needs the Chevy Volt.  Don’t forget, it loses money every year in Europe.  And now it owns 7% of another car company posting huge losses.

It hasn’t yet been able to pay the tax payers back for the “investment” they were forced to make in the company although they have found the time to pay bonuses to employees and executives, some of whose accomplishments apparently include this decision.

~McQ

Twitter: @McQandO

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6 Responses to GM buys into Peugeot, sucks up $400 mil in “junk bonds”

  • Haven’t we seen this movie before. How would you feel if you’d bought a brand new, shiny Saab in 2008?

  • This one went on Facebook. Immediately a lefty I know ran over to tell me about the costs savings it would bring. LOL.

    • @Harun O.o cost savings? Unless the master plan is for Peugeot to be bailed out by the EU, and GM figures they can cash in on their share.

  • Hmmm… GM already has trouble with German unions through Opel, so thinks adding even more chauvinistic French unions is a good idea? GM ditched Saab, which actually had a common platform with Opel, but is now teaming up with a maker with no common platform and claims it will bring economies of scale for GM, which is much larger than Peugeot?? GM *wants* to be associated with shitty French automobiles??? So tell me, who stands to gain from dumping a buttload of cash into a crappy loss-making company?

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