By on September 20, 2012

Ed Whitacre, the former CEO of General Motors in the post-bailout era, penned an op-ed in the Wall Street Journal urging the U.S. Treasury to sell its shares in General Motors “as quickly as possible”.

The crux of Whitacre’s argument seems to rest on eliminating beauracracy rather than overriding political or economic concerns. Whitacre writes that

“The government’s authority over GM today isn’t concentrated in the 500,000 shares it still owns, which amount to a hefty but not controlling 26.5% ownership stake. Rather, Washington’s power comes from the management apparatus of TARP, the Troubled Asset Relief Program, from which the $50 billion bailout originally came. TARP is funded by taxpayers, so there are many rules about how that money can and can’t be used. The result: GM spends an awful lot of time checking in with the people who administer TARP over everything from hiring to executive compensation and management. For a global company, that adds up to a lot of distraction.”

You can read the whole piece here. As one commenter so eloquently says, I’ll be sitting back with a big bag of popcorn…

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61 Comments on “Former GM CEO Ed Whitacre Urges Treasury To Sell Its Stake...”


  • avatar
    redliner

    It may be inconvenient, but on the other hand, GM still exists as an american company, instead of as a Chinese semi-state owned car companies purchased in equal parts to pillage it’s intellectual property and to export cheap cars into the US.

    • 0 avatar
      28-Cars-Later

      We created the situation whereby the Chinese have Fed dollars to burn in the first place by giving them our production capacity in exchange for a near zero labor cost and certain people getting rich at the expense of our nation’s industry.

      • 0 avatar
        billfrombuckhead

        Just like we did our Japanese frenemies.

      • 0 avatar
        28-Cars-Later

        Japan is a bit different. We disarmed them after a world war in which they were sent back to the stone age. I do not believe they further desire a grand empire having briefly achieved it, and their overall population is in decline.

        China is almost the opposite, a burgeoning population combined with steadily increasing consumption, an opposing political system coupled with a desire for empire and nuclear weapons capability. They are far more dangerous.

      • 0 avatar
        jkross22

        Do some research on what is going on with the Chinese economy. They are not immune, and if some predictions are true, they are in for as much of a ‘soft landing’ as we have experienced.

      • 0 avatar
        28-Cars-Later

        @jkross22

        Precisely… economic chaos in a nuclear power, its like 1991 all over again only this time the stakes are much higher.

  • avatar
    el scotto

    In a case of biting the hand that feeds you; an irate former GM CEO wants to get ride of those “pesky government officials”. The Samba of arrogance and ignorance continues.

  • avatar
    Pch101

    “TARP is funded by taxpayers, so there are many rules about how that money can and can’t be used. The result: GM spends an awful lot of time checking in with the people who administer TARP over everything from hiring to executive compensation and management.”

    Moral hazard is a bitch, ain’t it?

    The solution to this “problem” is simple: increase the value of the stock, so that we can sell it at breakeven. Until then, suck it up.

    • 0 avatar
      Dr. Kenneth Noisewater

      Catch-22: Government meddling reduces stock value. US should buy some puts and dump the stock, then buy some calls at the bottom.

      • 0 avatar
        Pch101

        “Catch-22: Government meddling reduces stock value”

        It’s quite the opposite. There would be no General Motors at all without government “meddling.”

        That “meddling” produced more value for the company than did the last string of the Old GM’s CEOs, who destroyed value instead of creating it. GM is a leaner, more focused business today because the task force shed dead weight that the old regime wanted to keep.

        GM’s stock value partly reflects the broader US economy (auto companies are highly cyclical, and a tepid US recovery is not going to be good for any car company that is highly dependent upon US sales). But the rest of it is a reflection of GM’s lack of market leadership in key segments and its mediocre profitability.

        GM can’t fix the US economic cycle, but it should be expected to address its market leadership. They had better make the Silverado a home run, to make up for the base hit with the Malibu.

        In the meantime, I want Uncle Sam breathing down their necks every step of the way until we get our money back. No company should think that it’s entitled to take large bundles of cash, only to avoid repayment just because it’s inconvenient.

      • 0 avatar
        bd2

        If you hadn’t noticed, Ford stock was trading at HALF its high from 2011 earlier in the year.

        US auto stocks have taken a beating due to shaky world economy, but both GM and Ford stock have seen a recent uptick (GM shares are up nearly $6 from the low in July).

        This just just GM execs (and former execs) b!tching since their lifetsyle is being crimped since their compensation and perks have been reduced.

        It would be stupid to sell now while US auto stocks are depressed due to investors’ concerns about the world economy.

        The world economy will eventually start to recover and that will coincide with GM’s launching of numerous new models, esp. for Cadillac which has higher margins.

    • 0 avatar
      dima

      What if he knows somthing we are not. What if price will be going down even more? then what?

    • 0 avatar
      dejal1

      Correct. I hated the bailout, still do, but it is what it is.

      GM and the unions (I’m not picking on the unions here) and their friends wanted this. GM got to forget billions in debt by putting the debt on “Old” GM and they still bitch.

      The weight of all that debt was less burdensome than having to hire people to make sure that the rules are followed? Yeah, right.

    • 0 avatar
      FleetofWheel

      Investment Pch101 Error

      “Getting even is just another way to ensure you lose any profit you might have made. This means you are waiting to sell a loser until it gets back to its original cost basis. Behavioral finance calls this a “cognitive error.”

      http://www.investopedia.com

      • 0 avatar
        Pch101

        You don’t get it either.

        The purpose of getting our money back is not for the cash. We bailed out General Motors, we did not “invest” in it.

        Rather, the purpose is to create moral hazard. Free money has to have strings attached, otherwise every other major corporation will be setting themselves up to get free money.

        This serves as a warning to other companies that are too big to fail — if you take our money, there will be a price to be paid. You can whine about us all you like, but if you want our cash, then you get to be in bed with us until you pay us back. If you want to get rid of us, then pay us.

  • avatar
    doctor olds

    @el scotto- you write as if ignorant of the fact that whitacre was installed by the auto task force and had no connection with GM before that. you may want to pay attention to what he writes if you want to know what is really going on.

    @pch101- you write as if whitacre has some stake in GM. he does not, at least not much, if any stake. The only possible stake he may, GM stock, makes him more interested in stock price appreciation than you. he also certainly knows how the bureaucracy impedes the company’s progress, whether you are too arrogant to understand or not.

    • 0 avatar
      Pch101

      “you write as if whitacre has some stake in GM.”

      You must be confusing me with somebody else, since I never said any such thing.

      Let’s try again. Free money comes with strings attached. If you don’t like the strings, then the answer is simple: next time, don’t take the free money.

    • 0 avatar
      el scotto

      No, Whitacre is writing for what he WISHES was going on. “GM is building World Class Cars” and “The Brave Leadership of the Obama Administration”. His suggestion that GM should have bought all the GM shares on the the day of the IPO and made up the loss with GM’s money is simply ludicrous. GM wouldn’t have had any money if they hadn’t got a sweetheart bankruptcy. He did lead a very customer unfriendly company before he was appointed to GM. I guess he thinks GM should have the same customer service experience as At&T wireless. Please go back to handing out sodas and hotdogs to shorter and shorter lines of Buick customers.

      • 0 avatar
        28-Cars-Later

        Lines at the Cadillac dealer aren’t much longer, and I learned yesterday a little over half of 2011 sales were SRX and Escalade variants which are cloned Chevys.

        Both brands could be saved and I believe they are honestly trying… I just wonder if what they are doing is the right direction.

      • 0 avatar
        bd2

        @28-cars-later

        The SRX is no more a cloned Chevy than the Lexus RX is a cloned Highlander, the Infiniti JX a cloned Pathfinder or the Audi Q7 a cloned Touareg.

        Once the Omega flagship is launched, Cadillac will have a full line of RWD models and they likely will add at least one RWD-based CUV, if not 2.

        As for the Escalade, automakers build their BOF SUVs on the same chassis as its lower-end models (Lexus with the GX and LX and Infiniti with the QX) since it wouldn’t be financially feasible to develop an entirely different chassis for a relatively low selling segment.

        And SRX and Escalade sales make up about half of Cadillac sales b/c there is really only 1 model in the Cadillac lineup that is in full supply, the aging CTS.

        ATS sales are just starting and the XTS is selling well, but is hampered by the lack of supply.

        Once sales of the ATS and the XTS ramp up, follwed by the launch of the 3G CTS and the ELR, sales of the SRX and Escalade as a % of Cadillac sales will drop dramatically.

        Going forward, Cadillac is in much better shape than Lincoln.

      • 0 avatar
        28-Cars-Later

        I believe the Lexus RX is essentially an extended station wagon for the Camry platform. I can’t speak to the other platforms, but I can say with regard to global platforms models are generally no longer unique… the exception being ironically the Cadillac Sigma platform.

        http://wikipedia.sfstate.us/Lexus_RX_%28XU30%29

        http://en.wikipedia.org/wiki/Toyota_Camry

        http://en.wikipedia.org/wiki/GM_Sigma_platform

        “there is really only 1 model in the Cadillac lineup that is in full supply, the aging CTS.”

        Read my mind, this has been my complaint for years. It think it was a mistake to turn the entire brand into the CTS (or its real name Catera as I despise the fake xTS names). I think the impending bankruptcy in the mid 00s axed a good deal of R&D funds and there was no choice but to continue Deville and Catera.
        XTS needs to go away though, the brand needs a proper flagship and this isn’t it.

        “Going forward, Cadillac is in much better shape than Lincoln.”

        Very much agreed.

  • avatar
    doctor olds

    @pch101- It isn’t me who is confused. your words prove ignorance of whitacre’s relationship to this, and the timing of events in the real world. he came on the scene after the obama administration took control and never got any “free” money. Is this logic too hard for you to follow?

    • 0 avatar
      28-Cars-Later

      I think is argument is GM got the ‘free money’ as it were not the executive in question.

      There is an old Polish proverb I think which sums this up:

      Dance with the bear, and the bear doesn’t let go.

      • 0 avatar
        doctor olds

        @28-Cars-Later
        It is a good proverb and the reason Ford did everything in their power to avoid “dancing with the bear”.

        GM didn’t get to choose. The only alternative was death (liquidation). It just bugs me that comments are made about Whitacre as if he was an old time GM exec. His interest was in serving the country by helping GM through the bankruptcy and he came out of retirement to do it.

      • 0 avatar
        jkross22

        “His interest was in serving the country by helping GM through the bankruptcy and he came out of retirement to do it.”

        Wow, he sounds like a swell guy – he took one for the team you say? So no ego involved?

        “Whitacre’s pay package includes a cash salary of $1.7 million that took effect Jan. 1. It also includes $5.3 million in stock awarded in increments starting in 2012, plus another stock award worth $2 million. The details, including the timing, of the $2 million stock award still need to be worked out, a GM spokeswoman said.”

      • 0 avatar
        28-Cars-Later

        He may or may not give-a-s*** its difficult for us to tell only given this context. I do doubt though GM failing is going to net he personally any gains.

        GM/Chrysler failed, certain people gained, banks massively failed, certain people gained.

        Gov’t is really the only industry where you can completely fail for a hundred years and still get rich.

    • 0 avatar
      Pch101

      “your words prove ignorance of whitacre’s relationship to this”

      It’s pretty obvious that you have no clue what I’m talking about. Not that I’m surprised by this or anything…

      • 0 avatar
        doctor olds

        what you are talking about is simple.

        the topic of the article is whitacre’s remarks.

        whitacre did not even work for the company prior to the government owning it.

        how can you or anyone here think he has any relationship to the “moral hazard” of government investment you bring up?

        the lack of logic is remarkable!

      • 0 avatar
        Pch101

        “how can you or anyone here think he has any relationship to the “moral hazard” of government investment you bring up?”

        It was already explained to you.

        Of course, you don’t understand it. Your years in the GM vortex taught you to feel entitled to a bailout, instead of grateful for having receiving something that you didn’t really deserve.

        It should be pretty obvious that Whitacre is expressing sentiments that are felt by the current GM management. I’m telling them and their fan club (i.e. cheerleaders like you) to suck it up and deal with it.

        Meanwhile, the rest of corporate America had better understand that if they need bailouts of their own, those bailouts aren’t going to be easy. Money should come with strings attached, otherwise we’ll just have more rounds of corporate welfare paid to whiners who don’t deserve it.

      • 0 avatar
        28-Cars-Later

        “Money should come with strings attached, otherwise we’ll just have more rounds of corporate welfare paid to whiners who don’t deserve it.”

        This is great common sense and I do agree accountability is necessary or it will continue, but the whole idea of a strings attached bailout reeks of “Quis custodiet ipsos custodes” or who watches the watchmen.

        Politics aside the track record of gov’t in the past fifteen years is beyond sketchy, heck these clowns bankrupted the Post Office, a 220+ year old institution in the past few years (Btw my father retired from the Postal Service so despite whatever slant you put on it, I know its 100% true what the Congress did).

        http://news.yahoo.com/blogs/ticket/congress-won-t-rescue-postal-defaults-health-care-221219388.html

        I wouldn’t trust a gov’t committee to run my lemonade stand, much less a wounded corporation. Perhaps Whitacre is on to something, and “treasury sell you stock” is a polite way of saying “gtfo of our way”.

      • 0 avatar
        doctor olds

        @pch, you are talking in circles, making assumptions about what others think.

        In response to Whitacre’s article you write: “Let’s try again. Free money comes with strings attached. If you don’t like the strings, then the answer is simple: next time, don’t take the free money.”

        This is logically disconnected from the reality that Whitacre was not even there to receive any “free” money yet you smugly presume to lecture him.

        You did not do well in school, did you?

      • 0 avatar
        Pch101

        You’re certainly making it easy to understand how GM could design lousy cars for as long as it did (has).

  • avatar

    Hello Good Sir,

    We will sell the remaining stock once your old employer cuts a check to us for the difference. Until then, on behalf of the everyone I must regretfully inform you to gtfo and take your fail with you.

    Thanks-
    Taxpayers

  • avatar
    el scotto

    No, guys wearing Kevlar and humping through some village and anyone else in the military are serving their country. A 61 million dollar retirement payout with some serious perks and coming back to be CEO of a company reborn of a sham bankruptcy and accounting tricks, is not, repeat not “Serving Your Country”. Any old white rich retired CEO would have suited the purpose.
    Talk to me about serving your country when you can call in a Medevac.

    • 0 avatar
      Darkhorse

      Amen el scotto! GM and Chrysler failed because their Boards of Directors were not patriots. Keeping such American icons afloat was their patriotic duty. They failed and will burn in Hell I hope.

    • 0 avatar
      doctor olds

      el scotto- i applaude the service of our men and women in the service, too!

      wrt:”Any old white rich retired CEO would have suited the purpose.”

      just curious, how much have you been paid to run an enterprise?

      • 0 avatar
        el scotto

        Retired with 24 years in, in my 40′s still working. Not retired for good like my dad is. In an idyllic world, I’d done a Ben and Jerry’s and made no more than 10 times what the lowest paid worker does. In the real world just about any CEO of a Fortune 500 company is making millions with stock options and some killer perks. That last sentence is my opinion, I didn’t do any research. I’m happy to get a cell phone and dry cleaning allowance from my company. Ex-wives and children in college keep me going to work.

  • avatar
    chaparral

    Selling out at $24/share is a loss of half the money the gov’t invested.

    The price/earnings ratio is 8.68 with $4.5B/year in earnings.

    If the company gets up to $6B/year in earnings, the P/E ratio will probably go to 12 or so, which will get the government’s money back at a stock price in the mid-sixties.

    If you want your large shareholder Uncle Sam to go away, make his investment profitable, and he will.

    • 0 avatar
      jimboy

      Well said. I’ll repeat my earlier comment in another blog. “If GM wants the government out of its pocket, then repurchase the shares at a value consistent with the amount of the original government investment” . Sounds fairly simple to me, especially since GM hasn’t or won’t be paying ANY TAXES for many years, thanks to a tax law loophole. They’re sitting on piles of (our) cash.

  • avatar
    el scotto

    Oops, I should have stated fresh out of bankruptcy all the bad things went to Liquidation Motors new and improved GM.

  • avatar
    mikedt

    The cynical part of me thinks the “executive compensation” is the thing that is bothering them the most. They can’t dump huge piles of cash/stock options on each other the way things are right now.

  • avatar
    wmba

    I see Dr Olds has made his usual attempt to rewrite history, leaping around, arms flailing, defending this time the idiot Whitacre. Ed’s the man whose extreme hubris scuttled the sale of Opel, to the detriment of new GMs share price today. Whitacre made poor old Fritz Henderson the front man for the non-sale of Opel. And then fired him.

    All documented here on TTAC back in the day.

    Why do I care about GMs share price today? Our Canadian federal government through the CDIC owns 9% of new GM common stock to this day. CDIC usually cranks out a profit, so I hope they hang onto the shares until they rebound in price. To hell with flogging off our shares on the cheap. CDIC did well off the Chrysler loans, remember Sergio complaining about extortionate interest rates?

    Whitacre, in my opinion, is a self-serving ass. I surely do cry about the poor ole boys in GM management wringing their hands over not getting the perks any true titan of industry deserves! Not. That’s probably the real reason GM wants the US treasury to flog its shares. Executive self-image.

    As Pch101 says, they need to get cracking on making even more desirable product, so that the share price goes up leading people to actually want to own them. Pretty simple. Sure the economy’s awful, and a turnaround won’t happen tomorrow. But this plea to sell shares NOW is no different from a kid demanding their weekly allowance before the chores are done, and hoping the doting parent will cave in.

    Oh yes, Whitacre, hand over heart, came as a true patriot to run new GM in a selfless way. And promptly screwed up the sale of the Opel albatross that hangs around the company’s neck to this day. Then, using his vast managerial talent, he fired Henderson and when he left gifted GM with that incredibly farsighted new CEO, Dan Akerson, a man whose far-reaching vision extends only to his own grandiosity.

    Dr Olds, you apparently live in some alternate universe where logic doesn’t exist. Vega a better car than an Opel was your rant yesterday. Sure. Whatever you say, Doc. And your arguments/earnest wishes, rose-colored vision of past GM glories as an “insider” typify the old saying, “couldn’t see the woods for the trees”. IMHO.

    • 0 avatar
      doctor olds

      I simply pointed out the fact that Whitacre was not there until after the government takeover, and did not want to be CEO. Those are facts. GM had a lengthy search for a new CEO, but could not offer enough compensation to attract the necessary talent so Whitacre stayed on. These are facts, not revised history.

      As for Vega- look at specs for yourself. Bigger, better handling, more powerful and sold many many more. In my book that makes Vega better, troubled as the car was.

      • 0 avatar
        Pch101

        “I simply pointed out the fact that Whitacre was not there until after the government takeover”

        Since all of us are aware of that, you’re not really proving anything, other than the fact that you’re quite good at missing the point.

        My comments had nothing to do with Mr. Whitacre’s past, present or future employment status. Even if he was just a random dude on the internet who had never worked a day in his life for GM (either the old or new versions), I would have still said exactly the same thing.

      • 0 avatar
        el scotto

        The Vega may have had great specs. It was easily one of the worst cars GM ever made. Rust and burn oil? C’mon down young man.
        Yes, it added cash to GM’s bottom line. However it many people swear off GM forever. People didn’t care or adhere to Sloan’s marketing plan. They went out and bought Japanese cars that were supposed to run forever. This cost GM billions in goodwill and opportunity costs.
        Work with me here. If I was King of GM, I’d throw out all the rules and buy out any dealer that bitched.
        I’d merge Cadillac and Corvette. They’d be the most bad-ass technologically advanced cars GM could build. It’s BS that only the Corvette gets the best engine. True global throw down cars. Buick, the emperor really like them and we’ll sell lots of them in China. A step down from Caddy.
        Olds, Opel, and Vauxhall would be merged. Entry level luxury. Pontiac? Mercedes/BMW fighters, small, fast and rear wheel drive. They’d be on a diet too.GM and excessive weight are synonymous.
        Chevy. A complete shakedown from top to bottom. Make people remember they’re in the car making business. I’d have meetings ever day to learn why we’re not as good as Toyota and Honda. Mandatory meetings on Saturday for all salaried personnel. Sunday meetings if your really screw the pooch. I’d send my best and brightest to Chevy. No tour in Chevy? Quality engineers would have an inside track. No important job for you.
        Chevy Truck? Stay on course, incremental changes.
        GMC Truck? Dead, badge engineering at its worst.
        As King, I’d have the ability to fire people on the spot. Turd polishers would be the first to go. Built your empire on polishing turds? You’re gone. Trying to defend the degrees of how much you were wrong.? That’s asshattery at it’s finest.
        GM has a culture of promoting turd polishers and those who like the to argue the degrees of their errors, not that they made errors.
        The buying public won’t accept an almost right, highly polished turd. GM will die again unless they accept that fact.

      • 0 avatar
        DinosaurWine

        Sorry, no matter how swell of a guy Whitacre was, it does not validate his opinion that the taxpayers should take a multi-billion dollar haircut because our involvement is hurting GM’s marketing efforts.

        That government oversight is somehow hampering GM’s efforts to become competitive is absurd – they have been circling the drain for the past 30 years. They couldn’t compete before the bailout and they can’t compete now, except now they can at least blame it on the government. What, did you think all of our money magically made them a better company overnight?

        If you think the government is truly stunting their ability to compete, you must not have seen anything they have made since the late 70′s.

  • avatar
    blowfish

    the more uncle sam escalates the senkaku island conflict the more buicks are going to sell.
    and GM’s stock is going to float up more!
    if the conflict really go south nippon’s car industries will meet its fire sale, japan’s PM is literally sitting under the sword of damocles or senkaku!
    as middle kingdom is not going to hold a tight leash on her people’s anti nippon sentiment. infact is letting them to go viral , burn a few more toyondas. then who with a sane mind is going a a new car from the land of rising sun?
    this time japan need lots more than the divine wind to blow this conflict away.

  • avatar
    jpolicke

    Obviously there weren’t any troublesome rules to interfere with GM’s p—ing away $400 million on a venture with PSA that was hopeless the day the agreement was made. The mind boggles to consider how lousy an idea would have to be for the government regulators to step in.

  • avatar

    I’ve got another plan, it’s called Return to Greatness and would sell so many cars the stock would rise to where the taxpayers would be made whole. for more info visit http://www.GeneralWatch.com or see The Buickman on Facebook.

  • avatar
    panzerfaust

    After reading Ed Whitacre’s bleating on behalf of GM, an old saying comes to mind…. let see… how does it go again? Oh yes,
    ‘Sucks to be you.’

  • avatar
    JREwing

    If Ed Whitacre’s chafing so badly under GM’s government ownership, perhaps it’s time to get some private investors to buy out the government’s share.

    • 0 avatar
      DinosaurWine

      If GM was a good buy, they would not be in the spot they are in today. The problem is, private investors could smell that stink from a mile away and stayed well clear, which is why you and I are part owners in GM.

  • avatar
    Mike Kelley

    This guy doesn’t buy Whitacre’s line:

    http://reason.com/blog/2012/09/20/how-gm-can-thank-taxpayers-a-modest-prop#comment

  • avatar
    FromaBuick6

    But, Ed, didn’t you told me that GM already paid the government back?

    I don’t blame the Treasury for not wanting to sell. Of course, with that chump Akerson in charge, the stock price is going nowhere but down.

    GM just wants off easy. Typical. In a just world, GM would have to foot the bill for whatever the government loses on the stock sale. Doubt that will happen.

    People admired Iacocca for paying Chrysler’s loans back early. People hate GM and the stooges that run it because they continue to pull crap like this.

  • avatar
    Polar Bear

    The government taking a visible loss on GM two months before the presidential election? It is not going to happen. Whitacre must know this.

    I doubt the US government will ever take a loss on GM. If GM stock doesn’t recover to parity the government will keep owning GM right down to a 2nd bankruptcy. Then all the money will be lost, but at least Washington did not have to make any decisions or take any risks about selling in time.

  • avatar
    Morea

    Would it be legal for the Federal government to buy a controlling share in GM?

  • avatar
    lw

    Can we officially start the countdown to the next GM bankruptcy?


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