Sunday, November 28, 2010

The Big Winner In GM Stock Sale - Not Taxpayers, But The UAW

The recent GM stock sale was supposed to be an opportunity for the American taxpayer to receive repayment on the Obama Administration's $50 billion bail out of the company. But the real winners by far were the coffers of the United Auto Workers...and ultimately, the Democrats at election time, who will grab their share of the swag in campaign contributions.

As you'll remember the government takeover essentially gifted GM to the unions and screwed over the private bond and equity holders , many of whom were private pension funds and retired auto workers. They have received nothing for their investments in the old GM.

The union, however, is sitting pretty. The sale of stock obtained by the UAW in the company's 2009 bankruptcy settlement well on its way to recouping the billions of dollars GM owed it, as compared to the taxpayers who have recouped only about 30 percent of the bail out.

The union earned a whopping $3.4 billion through the sale of one-third of its shares in GM last week. Analysts estimate that it would break even if it sells the remaining two-thirds of its shares at an average price of $36 — close to where the stock traded shortly after the offering hit the market.

Because of the far bigger stake inGM and the union's preferred position, for taxpayers to break even the stock would have to rise to at least $52 and by some estimates as high as $103 — levels that would take years to achieve if they ever get there.

Remember also that GM just received a $45.4 billion dollar tax credit against future profits at the American taxpayer's expense given to them by the Obama Administration that could keep GM tax free for years...a mere $100 billion gift to the UAW and the Democrats at our expense.

It's the Chicago way, gone national.

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