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Peter Schweizer | Auto bailouts: Obama cronies profit from cooked books





Let’s start with the players involved. General Motors (GM) was by far the biggest  recipient of auto bailout funds ($50.2 billion for GM  and $17.2 billion for GMAC). When combined  with Ally Financial (formerly GMAC),  taxpayers are still on the hook for $41.7 billion. Chrysler and Chrysler Financial received a total of $12.4  billion and repaid $9.5 billion, resulting in a net loss of $2.9 billion.

GM continues to hemorrhage market share  and controls just 17.7 percent of the auto market, a 90-year low. When GM  made a public offering in November 2010, the share price was $33 a share. It’s  now trading at around $25 a share. The federal  government owns 500 million shares of GM, or about 32 percent of the company. The  stock price would need to get to $53 a share to break even. At its current  market price, the government is sitting on a  $14.5 billion loss.

Despite claims that GM is selling a lot  of cars, a lawsuit filed by investors who bought into GM’s  initial public offering in June alleges that the books are being cooked. The  investors feel hoodwinked because GM was “predicting revenue based on production rather than actual sales.” (What  business does that?) The lawsuit references a Bloomberg article that states, “GM  may have been unloading excessive inventory on dealers, a practice known as ‘channel stuffing,’ in order to create the false impression that GM  was recovering and sales and revenues were rising.” The problem is that although GM is stocking more and more cars in its  dealers’ lots, few cars roll out of the showroom. So while GM  is being touted as a successful turnaround story, the all-American car company  is incentivizing its dealerships to take more product and counting that as  sales.

More.



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