EDMOND — Did you hear the good news? GM is “repaying in full” its loans from the U.S. and Canada, and almost five years early. Let’s break out the champagne and celebrate the comeback of the century! Looks like the taxpayer bailout of GM and the UAW was a success after all.

Are you kidding me? C’mon! They must think we’re all idiots with short memories. The entire notion that GM can repay anything is laughable at best. Ed Whitacre, GM’s CEO, was all aglow this week in an op-ed piece in the Wall Street Journal as he described the great condition of the new company — or should I say our company since taxpayers own about 60 percent of it.

He forgot to mention the $52 billion bailout from the U.S. government, i.e. you and me, and $9.5 billion from the Canadian government. Then there’s that little matter of Congress allowing the company to change $43.3 billion of our $52 billion loan into equity (stock) in the company, therefore taking the loan off the books. This left just a $6.7 billion loan from the U.S. and $1.4 billion from Canada, which they recently have repaid with some of the $43.3 billion in equity investment.

Look carefully at that last sentence again. We were literally repaid with our own money. I’ve seen shell games that were less rigged than that. To use a very technical economic term, we got taken to the cleaners.

I know Whitacre is pretty busy right now trying to stop this falling rock, so I guess it’s understandable that he forgot to mention the path of financial destruction that GM left behind. This also includes the financial beating that the GM bondholders took, plus the GM retirees and the pension funds that invested in them, all so the UAW could jump to the front of the line and get their money first. That is unprecedented.

Oh, and what about the extraordinary tax treatment GM received where the new GM got to keep the $12 billion in tax loss carried forward from the old GM, even though the old GM is still in existence. That is effectively a gift of another $12 billion that is coming out of taxpayer pockets. I guess that was just a little memory lapse and he meant to bring it up.

But I didn’t forget and neither should you. I understand that Whitacre didn’t cause the problem and he’s just the poor guy trying to fix it. But I’m outraged at Congress and others who concocted this outlandish scheme and then used taxpayer money to pay for it. How convenient to use revisionist history to brag about success that is nowhere in sight.

So, is this company that we all own so much of really doing that much better? Much of the improvement comes from GM slashing its debt load (thanks to us) and workforce as part of its bankruptcy reorganization last year. But it remains more than 70 percent government-owned (61 percent U.S. and 12 percent Canada) and is still losing money. GM lost $3.4 billion in the fourth quarter of 2009 alone. And while its car and truck sales are up so far this year, that’s primarily due to less profitable sales to car rental companies and other fleet buyers.

They are counting on a public stock offering to allow the U.S. government to begin recouping its remaining $45.3 billion investment. However, GM’s planned stock offering hinges on the company posting a profit and that could be awhile. GM posted a $3.4 billion loss for the fourth quarter of 2009, but its operations in Asia, South America and other regions made money.

GM last saw a profit in 2004, and lost $88 billion between 2004 and 2009 when it declared bankruptcy. GM was able to wipe out most of its staggering $95 billion debt in bankruptcy, closing last year with $15.8 billion in debt.  As it was reorganized, the United Auto Workers agreed to concessions, including a plan to shift $50 billion in retiree health care costs to a union-run trust, which GM (we) had to fund.

But here’s the next ticking tax time bomb associated with this mess. GM may no longer be the world’s biggest automaker, but it still operates the country’s largest pension fund. The threat to its pension plans always has been an issue, but it took on a new urgency when GM disclosed on April 7 that its plans were underfunded by more than $27 billion. In addition, a report last week from the Government Accountability Office says the pension crisis in the auto industry could create an unprecedented crisis for the federal Pension Benefit Guarantee Corp., a government-sponsored organization to backstop company pensions.

Could taxpayers really be on the hook for UAW pensions? You bet. According to GAO analysis, GM could face a funding crisis in 2013 or 2014 when, under the current projections, the automaker will be required to make more than $12 billion in contributions to its pension funds to keep them solvent. Where is that money going to come from?

Until GM is able to do a public stock offering, we will not know an approximation of taxpayer losses. Moreover, those losses do not include the pension time bomb. With GM still losing money on top of all those issues, why did GM repay TARP? To get out from under TARP restrictions on CEO and executive pay perhaps? Maybe I’m a little skeptical.

I have nothing against GM and I’m certainly not wishing for their failure. But let’s be real folks. To claim success at this point is nonsense. Had the government not made those loans (now converted to equity), GM would have gone bankrupt just as it did anyway. GM likely would be producing cars just as it is now, taxpayers would not be out $45 billion, and GM would not be Government Motors. The bailout was and is a complete failure. Thanks for reading.



NICK MASSEY is a financial adviser and owner of Householder Group Financial Advisors in Edmond. Massey can be reached at www.nickmassey.com. Securities offered through Securities Service Network Inc., member FINRA/SIPC.