AIG recently raised more than $6 billion to pay back the U.S. Treasury. Photo Credit: David Shankbone/Wikimedia Commons/CC-BY

AIG and General Motors have been making great progress in paying the United States Treasury back for the bailout loans both companies received. AIG and GM were both maligned for the huge amount of money the firms received from the government, but they are returning to solvency. AIG was the single largest bailout performed under the program.

MetLife stock sold to pay back loans from Treasury

Insurance giant AIG sold a portion of its shares in the MetLife insurance company and turned over the proceeds to the United States Treasury, according to USA Today. AIG gave up 146.8 million shares of MetLife stock, from which the company raised $6.3 billion to make payments to the United States Treasury. AIG is using the funds in the effort to repurchase the $18.2 billion the Treasury holds in preferred equity shares of AIG. The government also holds 92 percent of AIG’s common stock, which was a condition of the bailout package the insurance giant received from the Troubled Asset Relief Program, or TARP. AIG was the single largest bailout, receiving more than $182 billion in total. The bailout included the Treasury and the Federal Reserve purchasing toxic asset from the company and $68 billion in loans.

General Motors on the road to health

General Motors, another notorious bailout recipient, borrowed $49 billion from the government to stay afloat, and the company has been making huge strides toward paying it back. General Motors recently announced in an earnings report that the company had made a profit every quarter of 2010, according to Reuters. This marks the first time since 2004 that the automaker has been profitable for an entire year, and it made the largest profit since 1999. GM posted a profit of $4.7 billion for 2010, though the stock price for the company has barely moved since the initial public offering in November. The Treasury still holds 33 percent of GM stock, which is a significant reduction since November 2010, when the Treasury held 61 percent. It is projected that the GM share price will have to rise to $53 per share for the government to break even.

End result of TARP

David Miller, the chief investment officer for the Troubled Asset Relief Program, said that the cost of corporate bailouts is not likely to be more than the money allocated for the housing crisis, according to Reuters. Miller said the Congressional Budget Office estimates that TARP will cost a total of $25 billion, and the Obama administration estimates slightly more than $28 billion. Treasury Secretary Timothy Geithner has said the estimate of $25 billion may be high. Various companies still owe the government $135 billion for TARP loans.

Sources

USA Today

Reuters on General Motors

Reuters on TARP estimates

The GM IPO date is at hand after the company went bankrupt making huge SUVs like the Hummer that no one bought. Image from Wikimedia Commons.

Recently GM announced it would  hold its IPO on Nov. 17. Since then, many have been patiently waiting for the outcome of the initial public offering of stock in the company. The GM IPO has been a hot topic for months.

GM IPO date approaches

General Motors had to give the U.S. Treasury the majority of the company’s shares as part of the terms of the auto bailout and the GM bankruptcy more than 18 months ago. Since the company emerged from bankruptcy, an initial public offering was talked about for months. The company finally announced that a GM IPO would take place, and eventually the GM IPO date was set for Nov. 17. However, according to USA Today, members of the general public are not going to have GM shares made available to them. For an initial public offering, that is actually par for the course, as large investment houses are often given first choice by IPO underwriters. The idea is to get as high a stock price as possible right off the bat. General Motors has been posting consecutive profits all year.

Treasury could shed half its stake

On Tuesday, General Motors announced it was increasing the number of shares by 31 percent, up to 478 million from 365 million, according to Fox News. In the GM IPO, the U.S. Treasury could be selling as much as 50 percent of its stake in General Motors. However , if the share price doesn’t increase by at least 50 percent from the initial price of between $32 and $33 per share, the government will likely take a loss. Since the bankruptcy filing and the auto bailout, General Motors has shed underperforming brands such as Hummer, Saturn and Pontiac to focus on the brands that do well and emerged from bankruptcy shortly thereafter.

Remaining shares to be sold over time

General Motors, and the Treasury, announced previously that government shares would be released over time. Shares sold in the GM IPO won’t pay dividends until the government’s stake is completely gone. However, GM profits have been the largest in years.

Sources

USA Today

Fox News

Chevy has made another recall, this time on the Impala. CC by IFCAR/Wikimedia Commons

General Motors has begun an Impala recall. Possible seat belt defects are the cause of the 300,000 car recall. Belts may come apart in collisions because of improper mounting. There are only two affected model years. General Motors will contact owners of the affected model years.

Impalas recalled

More than 300,000 cars are going to need to be repaired by General Motors, according to the Impala recall because of the seat belt defect. There are only two affected model years of the Chevrolet Impala, according to USA Today. Owners of a Chevrolet Impala from the 2009 or 2010 model years should contact their nearest Chevrolet dealership or General Motors directly. The phone number owners can call to get information on the Impala recall is 800-630-2438. If your car is being recalled, you will be notified. Dealerships and GM will send out notices. Owners of the recalled cars won’t have to pay anything for the defective seat belt, and it is easy to fix.

Seat belt defect leads to recall

An division of General Motors is there specifically to make sure that nobody is hurt or killed before these problems are caught. CNN reports that no injuries or deaths occurred because the seat belt defect was there. The front seat belts are defective in the Chevy Impala. The problem is that the belts might not be properly anchored to the lap belt pretensioner. A crash might result in the front passengers not being securely held in. The mount and belt may separate from one another.

Routine repair makes this lucky

There started to be a lot of warranty repairs on seat belts. This caused General Motors to investigate the situation. The recall was announced just as a precaution since nine claims had come in by June 2009 and 32 had come in by August 2010. No reports were of injury or death. By the end of October, all owners should have their cars inspected.

Citations

USA Today

CNN

Ally Financial Inc. may have an IPO just like former parent company General Motors. Image from Wikimedia Commons.

In the past few weeks, there has been a lot of buzz about an upcoming GM IPO. The related company, Ally Financial Inc., is now looking at an Initial Public Offering all its own next year. Ally Financial used to be GMAC, or General Motors Acceptance Corporation, the loan company formerly part of General Motors. GMAC used to deal only in auto loans, but branched out into other ventures including mortgages. GMAC had to ask for emergency loans from the TARP program, and had to become an actual bank to get bailout funding.

Ally Financial starts posting profits

Ally Financial Inc. is the re-branding of GMAC, or General Motors Acceptance Corporation. GMAC was previously the division of banking and loan lenders for General Motors. GMAC took care of in-house auto loans, but also delved into real estate and other ventures. In the second quarter of 2010, Ally posted a profit of $565 million, according to Reuters. First quarter saw a profit of $162 million; the first profit Ally or GMAC had posted since 2008. This was largely thanks to the company getting some debt settlement relief from mortgage holdings.The company may file for an IPO next year.

Bank formerly known as GMAC

Ally Financial Inc., is technically a holding company with many divisions. The company was previously known as GMAC, which was entirely owned by GM until 2006. GM needed a quick payday and sold its banking and finance wing to investors. GMAC needed some quick loans as its loan portfolio and investments went toxic and was bailed out by the government in exchange for taxpayers holding majority ownership. In 2009, the company changed the name to Ally Financial Inc.

GM buys new auto financing company

As Ally Financial is getting its act together, GM isn’t resting on its laurels. GM has just acquired a majority stake in auto loan company AmeriCredit, according to the Wall Street Journal. This may be a move toward allowing Ally to become its own entity, as GM retains only a small stake in ownership, so GM can have an in-house lender that doesn’t do anything else.

Further Reading

Reuters

Wall Street Journal

A GM IPO has just been filed, and the installment loans from the Treasury will get a huge payment toward them. Image from Wikimedia Commons.

General Motors has finally put in the papers for what has been anticipated for weeks. A GM IPO has just been filed, although exact details are not known yet. So far, what is for sure is that GM will be offering preferred shares, but how many shares is unclear. This will bring the company a good amount of debt settlement relief, as it might pay off a good chunk of its debt to the U.S. Treasury. It will get the company closer to independence, and maybe get it some big time cash quick.

GM IPO to begin soon

General Motors filed for a GM IPO today. According to the New York Times, it could be quite the pay day for an IPO. The company will be offering preferred shares. However, GM hasn’t announced the total number of shares the company will be selling. Chairman and CEO Ed Whitacre announced he will retire completely from GM by the end of the year; he’d previously said he’d retire once the company was back on track. An initial sale of shares will probably liquidate a lot of debt.

Clearing of debt a major bonus

Among the many benefits of this sale of shares, and re-listing of General Motors, will be paying off a large part of the installment loans from the Treasury. According to CNN Money, the Treasury has agreed to sell some of the government’s stake in General Motors. Currently, the U.S. Government holds 60.83 percent of GM shares, and the Canadian government holds a further 11.67 percent. GM has paid the Treasury back about $7 billion so far.

Getting back into the black

General Motors, with this Initial Public Offering, will get at least part way to paying the debt the company owes to the U.S. government. GM is posting profits again, so it isn’t as if GM will need another loan until payday from the taxpayers again. The IPO would have to clear about $67 billion for taxpayers to break even on the auto bailout.

Further Reading

New York Times

CNN Money

General Motors posts profits for the first time in years. Image from Wikimedia Commons.

After GM and Chrysler went to the government asking for a bailout, and got one, General Motors has posted a profit for the first quarter of 2010.  It is the first time the company has posted numbers in the black since 2007.  GM recently repaid a portion of the auto bailout it was lent and is thought to be on the path to profitability. Ford Motor Co. also posted recent gains, so it seems auto companies are getting back on track, though they still have plenty to repay from the emergency loans they received from taxpayers.

GM posts first quarter gains

For the first time since 2007, GM has posted a first quarter profit. According to the New York Times, GM garnered about $865 million in profits for first quarter 2010.  It posted revenues of $31.5 billion, and cash flow about $1 billion in the positive.  It’s an overall positive sign for the beleaguered car maker, who previously had to ask the government for more than $50 billion in assistance. One year ago, the company posted losses of $6 billion.

Payment on the loans begun

Weeks ago, GM made payments on a portion of the loans from the Treasury.  The actual loans to GM and to Chrysler were bundled loan packages, and they paid off one of the portions, years before it was due.  While this was touted as a victory by GM and also Chief Executive Ed Whitacre, it was only a payment of $8.2 billion to the governments of America and Canada.

Not out of the woods

Despite the return of GM profits, the company is still heavily in debt.  The loans it received from the U.S. and Canadian governments totaled more than $50 billion. GM has been making obvious positive strides but isn’t completely free yet. At present, the U.S. Treasury still owns more than 60 percent of GM, and those ownership stakes can only be bought by stock offering when the company goes public again. According to the same piece in the New York Times, they will potentially make a public offering by year’s end.

General Motors makes $6 billion payment

General Motors wired the final payment Tuesday night on $6.8 billion in installment loans from U.S. and Canadian governments. More than $1 billion went to the Canadian government, and $4.7 billion went to the U.S. Treasury. According to Reuters, the U.S. Treasury has confirmed that General Motors has paid its loan obligation a full five years before the maturity date of the loan.  The loans made to General Motors and Chrysler were part of the TARP program.

General Motors to begin mass production of Chevy Volt

Production has already commenced on the Chevy Volt, the plug in hybrid.  It is being manufactured at the Hamtramck plant near Detroit.  General Motors Chief Executive Ed Whitacre has also, according to CNN, announced they will invest $136 million into the Fairfax, Kansas and $121 million into the Hamtramck, Michigan plants for production of the next generation Malibu. The Fairfax plant also produces the Buick LeSabre, and the Hamtramck plant produces the Buick LaCerne and Cadillac DTS models, among others.

Not out of the woods just yet

The U.S. and Canadian governments are still majority shareholders of General Motors.  Currently, according to this article in The Guardian, the US and Canadian governments collectively hold 73 percent of GM stock, the U.S. holding 60 percent.  General Motors received about $50 billion from the U.S. Treasury in TARP funds, and the plan is that once GM is allowed to go public for stock purchases again, the taxpayers will get back something on their investment. Chrysler is still struggling, though it has begun to make positive steps.  The Wall Street Journal reports that Treasury Secretary Tim Geithner will be meeting with Whitacre soon.

So is it ok to buy GM again?

Many people were dissatisfied with the involvement of the Treasury, and also the fact that one of the largest manufacturers of domestic automobiles slipped so badly.  The car manufacturing industry is also one of the largest employers in the US, and thousands were laid off in the wake of the General Motors and Chrysler bankruptcy.  This is proof that GM is returning to not only solvency, but perhaps to profitability, and with the upcoming release of the Chevy Volt, Detroit may soon see the dawning of a new day.

(Photo Credit: http://www.flickr.com/photos/jm3/ / CC BY-SA 2.0)

Pay Czar Kenneth Feinberg will once more slash and burn the salaries of TARP CEOs. (Photo: Wikipedia)

Obama “Pay Czar” Kenneth Feinberg wields a mighty money ax, and that ax is coming down once more on executive salaries at bailed out companies, says Reuters. The five firms under consideration – AIG, General Motors, GMAC, Chrysler and Chrysler Financial – are still depending upon government assistance to remain afloat. Since the Obama administration has found that previous crackdowns haven’t sent talented workers “fleeing for the exits” as the companies feared, the Pay Czar has the power to make another cut. Overall for 2010, the Treasury cut cash pay 33 percent.

Pay Czar’s office says 84 percent still with firms, despite pay cuts

In fact, Feinberg told the media that “There is a striking number of holdovers.” So far, that’s all the evidence the Treasury needs to justify striking this delicate balance and enable more money to come back to American taxpayers. The firms must be able to function, but taxpayers’ overnight loans must also be repaid. If a firm received “exception assistance” from the $700 billion in TARP funds, that firm must make sacrifices to repay America’s taxpayer base.

People don’t like to hear about AIG execs receiving multi-million-dollar bonuses

Yet that’s what happened, even after taxpayers had given up TARP monies to keep them afloat. Now that Pay Czar Feinberg is making wider cuts, the hope is that more Wall Street firms will follow the example. It could be the only way to begin restoring public confidence in a financial sector that openly played unnecessarily risky games with other people’s money. Reuters reports that Bank of America and Citigroup have repaid all or some of the TARP money they took, but too many offenders are still on the hook.

No cash bonuses, no long-term restricted stock, no golden parachutes

Those have all been eliminated in those companies under Pay Czar Feinberg’s watch. That frees up $45 million for AIG to repay their obligation to the American people. Salaries will also remain frozen at AIG with only “one exception” until they meet their obligation, says Feinberg. GMAC’s CEO has no cash salary now, only long-term stock. Chrysler’s CEO has a similar deal. Salaries there and at General Motors have been tightly monitored and kept down.

Let us reflect back on your greed

Companies that repay their TARP obligation would technically slip out of Pay Czar Feinberg’s regulation. Perhaps this is why he is looking to expand his legal authority. Reuters says he has contacted 419 TARP firms – including those who are technically off the hook – and asked them to “look back” at their past salary history. If pay was “excessive” between October 2008 (when TARP funds were first distributed) and February 2009 (when legislation affected pay levels at TARP firms), Pay Czar Feinberg wants there to be renegotiation. Specifically, pay above $500,000 for 2008 that is “not in the public interest” will apparently be routed back to American taxpayers in a yet to be determined percentage. Companies can either cooperate voluntarily or be forced by the Pay Czar to comply and give up news of their transgression to the public.

That’s quite an aggressive retroactive plan, isn’t it?

It will be interesting to see how many TARP companies fall in line. It is difficult to imagine the American public having any sympathy for them at this point. The recession has run too long and struck too deep in the country’s consciousness for more excuses. Taxpayers are not a personal loan company for these wasteful behemoths. Pay Czar Kenneth Feinberg may be the czar America needs; he may be the czar that Glenn Beck will regret weeping over.

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GM recall will affect 1.3 million Chevy and Pontiac compacts

So if you want to be accurate, this GM recall is technically a Chevy recall and Pontiac recall. According to the Huffington Post, the vehicles are sold in the U.S., Canada and Mexico. General Motors is simply the parent company. GM spokesman Alan Adler told the media that it will take time to get new motors from supplier JTEKT Corp, and General Motors will let owners know when the new parts are available.

The Chevy and Pontiac recall vehicles are polite enough to warn you

If the power steering fails in your GM car, a warning light appears on the dash and a pleasant chime sounds. This is more than Toyota and Honda have offered. If only people could be warned before brakes fail or accelerators lock, they could perhaps dive out the window and continue to live a life of fulfillment. In the case of the defective Honda airbags, the car could remind you to don face shield and body armor before driving.

What cars are affected by the GM recall?

Rather than keep you waiting any longer, here’s the current list:

• 2005 through 2010 Chevy Cobalt
• 2007 through 2010 Pontiac G5
• 2005 and 2006 Pontiac Pursuit (Canada)
• 2005 and 2006 Pontiac G4 (Mexico)

These vehicles are considered safe to drive until the new power steering motors are available to be installed by dealerships. According to Adler, it typically takes 20,000 to 30,000 miles before the power steering issues appear. Furthermore, power steering “usually comes back” when the car is restarted.

Investigation of the GM recall problem began January 27

That’s when the National Highway Traffic Safety Administration started their investigation. There were 1,100 complaints about the power steering assist issue, and among the complaints were notices of 14 crashes and one injury. As GM VP of Quality Jamie Hresko said in a statement, the GM recall is more for customers’ “peace of mind,” rather than an immediate safety issue.

Need an assist?

The GM recall isn’t serious, but your auto financing issue could be. If you’re worried that your credit could be a deal breaker, try Car Deal Expert. They can connect you with lenders that can provide the best possible auto loan rates for your credit!

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Photo: http://commons.wikimedia.org/

Today it was announced that General Motors will be selling off their inventory of Saturn vehicles. Saturn vehicles will join with the service and rental car lots operated by select dealers. This will enable dealers to slash prices up to 46% off retail price. These Saturn vehicles are brand new, but will be marketed as used because technically the dealers will be considered the first owners.

Many may hesitate to buy

There’s reason to hesitate in buying a Saturn from a generic auto dealer as that GM stated that they will honor existing warranties on these liquidated vehicles. The fact that these cars will be considered used may or may not be a deterrent to prospective buyers. Because the resale value will be very low, GM is losing a lot of money on this deal by paying $ 7000 to dealers on every car. It is said to be part of their reorganization process and that it will pay off in the long run.

What this means for you

I’m a Saturn owner and I love the brand, so I’m pretty excited that I’ll be able to apply for an online installment loan or payday loan to secure funds for my new Saturn. My Saturn is 5 years old and I have yet to have a problem with it. I have been on many long road trips, and with its digital compass that’s viewed on the rear view mirror I have never been lost.

When will this sale happen?

It’s reported that this will occur around January 4, 2010 and up to three months of inventory will be liquidated. That’s roughly 3,500 Saturn’s that bargain hunters will be able to purchase. General Motors is desperate to rid themselves of their Saturn and Pontiac vehicles. General Motors will be left with only Chevy, Buick, and Cadillac for the coming years.

Bye-bye Saturn cars! Image from Flickr.

People shopping around for cars and auto loans should take notice: You might have an opportunity to to get a brand new Saturn car for a used-car price. The same thing goes for Pontiacs.

General Motors is discontinuing both brands, so Pontiac and Saturn cars are bascially going into fire sale mode now. I am still trying to understand exactly how this sale works, so perhaps someone out there who is more business savvy could leave a comment to fill in the missing information.

Incentives plus price slashing

First of all, GM says it will pay dealers “$7,000 for every new Saturn or Pontiac on their lot that is moved to rental-vehicle or service-vehicle fleets operated by the dealers,” says the Wall Street Journal. So, basically, GM will pay dealers to take ownership of the cars. So that’s weird and backward. Right?

Then, dealers must label these cars as “used” because technically the dealers are the first owner, not the customer. Of course, most of the cars will not actually be used, and they’ll still have zero miles (or just test drive miles) on them.

A little help?

So, what am I missing here? This strategy really makes no sense to me. Why doesn’t GM just give bonuses for Pontiac and Saturn cars sold? Why not just slash prices instead of going through the process of justifying and slapping a “used” label on there?

I’m still waiting for this to click. The brands are both being discontinued, so it can’t be for the purpose of maintaining value attached to the Pontiac and Saturn names. I’m at a loss. Let me know what you think.

The bottom line

Anyway, regardless of exactly what GM and its dealers are doing and why they are doing it, you could be able to buy Pontiac and Saturn cars for super cheap, so if you’re thinking about getting a new car sometime soon, you might want to set your plan in motion sooner rather than later.