Auto bailout has already helped GMAC and GM sales

[Beet]

Written by Tony Wikrent (not me) at The Economic Populist"

"Emptywheel has looked closely at the numbers for December auto sales, and reaches a startling conclusion:

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Emptywheel also notes that Ford has managed to gain market share for three consecutive months now - for the first time since 2001 - again giving the lie to Shelby the Republicans.

But here's the really amazing thing, down in one of the updates:

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Zounds! That means that if you give money to companies that actually, you know, produce something, rather than like, Goldman Sachs, there is a positive result! Amazing! I say take back all the $350 billion already given to Wall Street and the banks, and give it to the auto industry instead!

Emptyhwheel ends with an update on Hyundai, which has a U.S. plant in Alabama: the numbers are as bad as the other companies,

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"

http://www.economicpopulist.org/?q=content/auto-bailout-has-already-helped-gmac-and-gm-sales

[Beet]

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And giving zero-interest loans to people who are the same crappy debtors (yes, even though GMAC has said these are "prime debtors", that means the minimum FICO score is 621, when the national median is over 700) AND who are now much more likely to default than they ever were, say three years ago, (which was already high) due to lowered wages/greater chances to be laid off is a good thing?

To me, it makes it even more clear that GM and GMAC are likely is going to go belly-up at some point in the near future, probably after a few more rounds "government assistance" from the taxpayer. 

Need I remind you that this money being loaned out at 0% must be paid back to the federal government through an 8% dividend on its equity shares of GMAC.  This makes financial sense how?

This further reinforces the rather interesting point that, although the credit markets have loosened up a little, any loosening is entirely due to the federal government backstop.  Unless this changes in any material sense (and it most likely won't because the Feds seem increasing interested in getting so involved in the credit market that they are shutting out private entities), the end game (TSHTF) is still the most likely *final solution*.

Getting to the writer's last point, I have said for a while that Ford was the most likely of the Big 3 to survive, long-term, in its present condition.  I still think so.  Gaining market share is positive news, even though functionally it means Ford is being killed less than everyone else.

I have an interesting Houston anecdote from the real estate market to share that's related to this, but I'm not sharing it right now.  Another thread perhaps... 

http://www.bloomberg.com/apps/news?pid=20601087&sid=aKyOm6fygQ2U&refer=home

Any short-term recovery will be funded in part by loans, Sam. Keeping a minimum FICO score of 700 is not a realistic number regardless of whether the entity behind it is being driven by government spending or private spending. Not enough people have those kinds of FICO scores to support the sufficient auto demand to keep the auto industry going in the short run. If the FICO requirements had not been lowered, then auto sales could not possibly have recovered, and both GMAC and GM would have been doomed; and doomed at a time when the Federal stimulus is far from ready, and at a time when other sectors of the economy are also laying off. With expanded volume, both GMAC and GM have a chance, although Ill admit that they will both be dismantled as they are in the short run.

As for the Feds "getting so involved in the credit market that they are shutting out private entities", if the Fed hadnt gotten involved in the credit markets, there would be no private entities. All of the major banks and lending institutions would have failed. Instead of the expected 6% drop in GDP next quarter, it would be more like 20-30%.