WSJ - A GM Unit in China's Hands

Thursday is Veterans day. It is a day when Americans reflect on the scarifies of our grandfathers, fathers, uncles, brothers and friends who fought against the Nazis, Japanese, Communists and now the Taliban.

It has been 60 years since brave American men fought against the Red Chinese on the Korean peninsula. Battles such as Pork Chop Hill and Heartbreak Ridge are rarely discussed in the history books our children are taught from each and every day in our publicly funded schools, which is why there will be no outrage from the masses about this story.

In a nutshell the U.S. government, as majority owner of GM, sold Nexteer, a unit of GM which made steering equipment for decades under the name Saginaw Steering Gear, to the Chinese government for $450M. While its certainly upsetting that Americans in America are now working for a Communist government thats not the worst part of the story. Because you see the real kick in the teeth is that Nexteer produced the M1 carbine, which was one of the standard issue rifles for American solders in both WWII and the Korean War. Over 36,000 American lives were lost during the Korean War fighting the same Chinese government who now owns Nexteer thanks to our very own government.  

On Thursday take a moment to reflect on the scarifies of our solders because our own government certainly doesn't seem to care about them anymore.

A GM Unit in China's Hands

You don't need to understand exchange rates and trade wars to grasp the economic change that has come to Saginaw, Mich. Remarkably, the largest private employer there will soon be the city government of Beijing.

Tempo's Zhou Tianbao, Pacific Century Motors' Zhao Guangyi and GM's Scott Mackie in Detroit in July when GM's Nexteer was sold.

In the weeks ahead, a 104-year-old unit of General Motors will be sold to new owners from China. The unit made steering equipment for decades under the name Saginaw Steering Gear. Now known as Nexteer, it employs 8,300 people around the world. Its new Beijing owners call themselves Pacific Century Motors.

You and the rest of the world probably missed this $450 million deal. General Motors, still controlled by the U.S. government, gave it little attention this summer as it readied its own high-profile return to the stock market.

But it is one of the landmark deals of the era, the first time Chinese investors have bought a U.S. industrial operation of such scale and history: Twenty-two factories around the globe, six engineering centers, 14 customer-support centers. All of it will be run from Saginaw, where devotion to the company extended to a now-defunct hockey team. It called itself the Gears.

During World War II, Saginaw Steering Gear manufactured M1 carbines used by Marines in the Pacific.

"Did it really need to be sold to the Chinese?" asks Roger Kahn, a Michigan state senator from Saginaw. "I want to see businesses successful in the U.S. owned in the U.S. This doesn't meet the standard."

Ironically, at the G-20 conference in Seoul this week, U.S. leaders are trying to cajole China to buy more from the U.S., to help right a trade deficit that hit $28 billion in August alone. Such imbalances, they say, helped feed the credit craze that culminated in the 2008 financial crisis.

All of these things are conveniently abstract at G-20 meetings. In Saginaw, they are experiencing first hand the collision of two economies in motion, of Chinese ambition and American pride.

People inside and outside the company seem gingerly accepting of Pacific Century, a venture of the city of Beijing's investment arm and a closely held Beijing auto parts company called Tempo Group.

Nexteer was in bad straits in recent years. It has been starved for capital. Its customers—other car companies—preferred it to be independent and not a part of GM.

Once Nexteer hit the auction block, the Chinese investors proved surprisingly thorough, even though some of them didn't speak English, said a person familiar with the transaction. They funded their deal with all cash, using no debt. And the opportunity for Nexteer to penetrate the Chinese auto market, soon to be the world's largest, was a major selling point for GM, this person said.

The Chinese buyers beat out Korean and U.S. private-equity contenders. The two sides announced their deal at a small July news conference in Saginaw. U.S. and Chinese flags flanked the dais.

"I'm sure there are a lot of people who are not happy they're Chinese-owned," says Scott Somers, who runs Mid-States Bolt & Screw just down the road from Nexteer, which is a customer. "But at this point it seems to be a positive thing. Lots of businesses are involved with that complex and depend on it for their livelihood."

The feeling is more begrudging for the workers inside the company. One, who called the Chinese "commies," complained to a union official that the U.S. flag and a P.O.W.-M.I.A. memorial flag were taken down when Chinese officials visited recently. A company spokesman said he had no knowledge of any flags being taken down.

And while they like the stability of new owners, "everyone is concerned about long-term viability," said one United Auto Workers official who asked not to be named. The union recently took a pay cut ahead of the transaction. "We don't know whether the intention is to buy the book of business and move to China or stay here. We do not feel comfortable."

One can sympathize with the union's worries of a Trojan horse. Auto parts have remained a key U.S. export. And Nexteer's new owners are eager to buy the company because of its more than 1,000 patents, says Jack Chen, an investment banker at Los Angeles's Transworld Capital Group who helped arrange the deal. "This dramatically shortens the technology gap between China and the rest of the world," he said in an interview.

It is hard to know just how the technology will make its way back to China in the years ahead. Nor whether that will hurt or help the people who work in Michigan or those served by the Beijing city government.

Meantime, Saginaw must strike a most practical of arrangements. Chinese capital and access to its home markets is once again giving the city some optimism after unemployment spiked to 14% early this year. The company is adding 100 engineering jobs this year. It is expected to increase its United Way contribution after having to reduce its gifts in recent years.

More broadly, direct Chinese investment on U.S. shores may help improve the countries' fraught trade relationship, in the same way that a wave of Japanese auto plants did here in the 1980s and 1990s.

More investment may also give the U.S. leverage to encourage China to open up its borders to U.S. firms, which are frequently hamstrung by onerous investment rules.

The U.S. was built on foreign investment for centuries, reminds Dewey & LeBoeuf attorney Alan Wolff, a former U.S. trade negotiator. "And we should bolster any investment that encourages U.S. manufacturing, including from China. We'd rather build it here than there."

And so it begins. The Pacific Century.

First stop, Saginaw.

Its good to be in business with the government. Sure they dictate company policies, like building electric cars rather than SUVs, and sure they make you give pay raises for union employees that don't deserve it. But if you don't have to pay taxes who cares about that other stuff.

You know who it sucks to be? Ford. They didn't take a dime from the government, they negotiated with their Union and got rid of their pension obligations, they paid off their debts and it doesn't matter that they played by the rules because GM will be kicking their ass in three years because of this communist bullsh*t.

GM Could Be Free of Taxes for Years

 By RANDALL SMITH and SHARON TERLEP

General Motors Co. will drive away from its U.S.-government-financed restructuring with a final gift in its trunk: a tax break that could be worth as much as $45 billion.

GM, which plans to begin promoting its relisting on the stock exchange to investors this week, wiped out billions of dollars in debt, laid off thousands of employees and jettisoned money-losing brands during its U.S.-funded reorganization last year.


Now it turns out, according to documents filed with federal regulators, the revamping left the car maker with another boost as it prepares to return to the stock market. It won't have to pay $45.4 billion in taxes on future profits.

The tax benefit stems from so-called tax-loss carry-forwards and other provisions, which allow companies to use losses in prior years and costs related to pensions and other expenses to shield profits from U.S. taxes for up to 20 years. In GM's case, the losses stem from years prior to when GM entered bankruptcy.

Usually, companies that undergo a significant change in ownership risk having major restrictions put on their tax benefits. The U.S. bailout of GM, in which the Treasury took a 61% stake in the company, ordinarily would have resulted in GM having such limits put on its tax benefits, according to tax experts.

But the federal government, in a little-noticed ruling last year, decided that companies that received U.S. bailout money under the Troubled Asset Relief Program won't fall under that rule.

"The Internal Revenue Service has decided that the government's involvement with these companies, both its acquisitions plus its disposals of their stock, means they should be exempt" from the rule, said Robert Willens, a New York tax consultant who advises investment banks and hedge funds.


The government's rationale, said people familiar with the situation, is that the profit-shielding tax credit makes the bailed-out companies more attractive to investors, and that the value of the benefit is greater than the lost tax payments, especially since the tax payments would not exist if the companies fail.

GM declined to comment.

The $45.4 billion in future tax savings consist of $18.9 billion in carry-forwards based on past losses, according to GM's pre-IPO public disclosure. The other tax savings are related to costs such as pensions and other post-retirement benefits, and property, plants and equipment.

GM may avoid paying up to $45 billion in taxes for up to 20 years, according to people familiar with the situation. Above,GM's Cadillac logo is displayed on the grill of a Cadillac SRX.

The losses were incurred by "Old GM," the company that remained in bankruptcy after the current "New GM" resulted from the reorganization last June.

 

 

 

WSJ: Pink Cadillac The Communist Party propaganda film with an all-American sponsor.

With a Marxist in the White House this is a match made in heaven.

The Communist Party propaganda film with an all-American sponsor.

Moviegoers in China will probably find few surprises in the Communist Party's latest propaganda biopic, "The Great Achievement of Founding the Party." But readers outside of China may be surprised to learn the identity of the film's sponsor: Cadillac.

Maybe we should have seen this brand alignment coming. Cadillac has been selling smartly in China since launching there in 2004, providing a rare bit of good news for General Motors. The Communist Party's new film, glittering with the brightest stars of the Chinese screen, represents great visibility. Perhaps there will even be an opportunity for product placement, such as the Red Army parading "capitalist roaders" in a classic Coupe de Ville.

Cadillacs have long inspired awe in China. In 1985, a state-owned investment company imported a fleet of 20 stretch limousines, the company's first delivery to China since before the revolution. At a ceremony in Beijing, hundreds of Mao-suited bystanders stared in wonder at the 22-foot-long land yachts, pimped out with color TVs and ice buckets. The purchase price represented 115 years of an average worker's wage, according to one contemporaneous American newspaper account.

Today, a vibrant middle class has made China the largest car market in the world. But elite civil servants still lust after Detroit iron and German coachwork. Tour any major boulevard in Beijing or Shanghai and you'll see that the party's periodic edicts against conspicuous consumption have not stanched the taste for Benzes and Caddys.

Like any company doing business in China these days, Cadillac can hardly afford not to play along. It's probably money well spent to have the film's cast roll up Hollywood-style to the premiere in shiny new Escalades. It seems Cold War ideological enemies have traded places, or—given GM's recent history—perhaps met somewhere in the middle.

As we all know the majority shareholder in GM (Government Motors) is the American taxpayer so we went from fighting Communism all around the world to now sponsoring Communist propaganda films?

So my question for you is does this latest development make us all Communists?

'Old GM,' Bad Assets Linger On

While the New GM is planning to issue an IPO in the Fall:

General Motors Co plans to file its registration for an initial public offering during the week of August 16, just after the expected date for its second quarter results, according to two people with direct knowledge of the preparations.

A GM filing with the U.S. Securities and Exchange Commission would be the first step toward an IPO to reduce the U.S. government's ownership in the automaker after a $50 billion bailout in 2009.

By filing with the SEC in August, GM is aiming to complete its IPO before the November U.S. elections, according to the sources, who asked not to be named because the closed-door preparations remain confidential.

http://abcnews.go.com/Business/wireStory?id=11233100

The OLD GM aka GM Liquidation is a toxic wasteland that hasn't had much success in selling off properties in this sh*tty economy.

By MIKE SPECTOR

A year into the process of shedding GM's "bad assets," only one former factory and a few other properties have found a second life.

The vast majority of the auto maker's closed offices, decrepit plants and parts depots that were left behind in bankruptcy court remain on the market or are slated for demolition. Some of the properties are contaminated with toxic waste; others are cavernous structures way too big for alternative uses. Few sport good locations.

It could take years to dispose of the 200 remaining properties, the detritus of one of the country's biggest-ever bankruptcies.

Washington last year pumped $50 billion into General Motors to prevent the car maker's collapse and decreed that its "good" assets should be split from the "bad" assets. The U.S. steered GM through a quick bankruptcy sale that sent its best assets to a new, leaner company, now 61% owned by U.S. taxpayers.

The rest of the assets were left in bankruptcy court with "Old GM," a shell of the once-dominant auto maker, renamed Motors Liquidation Co.

The Treasury lent $1.175 billion to Motors Liquidation to help administrators get rid of GM's worst albatrosses. The government didn't expect to recoup the loan. Instead it decided to subsidize Old GM's cleanup and focus on creating a viable "New GM."

Motors Liquidation pegged the value of all its assets at around $2.3 billion in court papers, but officials have conceded from the start they won't come close to recovering that amount.

Unburdened of excess capacity, outmoded factories and much of its debt, the new General Motors Co. produced a $1.2 billion operating profit in the first quarter.

But there is some good news Old GM was able to sell off a former factory in Delaware for $20 million. The only problem is that the factory was sold to a company that received a $500 million loan from the Government to build electric hybrid cars.

Meanwhile, Motors Liquidation has sold one former factory. A judge in June approved Fisker Automotive's plans to buy an old GM plant in Wilmington, Del., for $20 million and use it to build plug-in electric hybrids starting in late 2012. But even that deal wouldn't have come about without government funds: The U.S. provided $529 million in loans to Fisker as part of a plan to stimulate development of advanced-technology vehicles.

http://online.wsj.com/article/SB20001424052748703720504575377471751017174.html
So let me get this straight we have loaned over $51.5 billion to Old GM, New GM and Fisker and we have received a total of $20 million of our own money back so far. Sounds like a deal that would put any other business in bankruptcy court but come November it will be touted as great success by the politicians that voted for the bailout.

So Who is Exempt from the Proposed Universal Heathcare Taxes?

Well well it looks like two very powerful lobbies will be exempt from the new taxes being proposed to cover the costs of universal heathcare. Last Friday, in the Wall Street Journal Betsy McCaughey noted that under the current Kennedy healthcare bill both Federal Employees and Politicians won't be paying any more taxes for their very generous insurance plans as they are exempt from the proposed tax. Further as Betsy notes in her opinion piece "last September Sen. Barack Obama promised that under his health-care proposal "you'll be able to get the same kind of coverage that members of Congress give themselves." On Monday, President Obama repeated that promise in a speech to the American Medical Association. "http://tiny.cc/U29Gf
The problem is that we are not going to get the same level of care as our public servants nor are they going to have to accept the new "public plan" or contribute towards it. Its great to be king.

But wait its not just Congress and Federal Employees that get exemptions under the new plan. All of our union employees at Chrysler and GM (yes our employees we do own their companies) are likely to be exempt from the new taxes proposed to cover the costs of insuring all Americans. Check out this article by Jed Babbin at Human Events.com http://tiny.cc/6bgqZ So while some of us will see our benefits decreased or dropped if this legislation is passed the rest of us will see higher taxes unless we fall in one of these categories. I think I need to start a union just so I can avoid taxes. Anyone with me.