By on June 10, 2010

One might believe that GM’s forthcoming IPO marks the second coming of Christ.  GM, once the world’s largest corporation, faced oblivion in the winter of 2009.  The train wreck of this former company reemerged from burial last summer through the generosity of the US and Canadian taxpayer as a new company shorn of most of its former financial liabilities, unproductive assets, and brands it no longer could support.  Everything that Jerry York (R.I.P.) told the automotive world in January 2006 that GM needed to do to survive back then finally came to pass.  And now, it’s preparing an IPO to swap ownership from the governments to the public. Ed Whitacre and his team will get the credit for a most remarkable turnaround while Obama will bask in the light of his stewardship of public monies.  Let’s get the story straight.

For starters, GM’s “turnaround” is mostly a result of the balance sheet restructuring.  By eliminating its onerous debt load, transferring a good portion of its UAW VEBA obligation from debt to equity, and killing four brands along with eliminating a bunch of unnecessary assets (like NUMMI), it greatly lowered its operating breakeven level in North America.  Think of it as you tearing up your credit cards, getting rid of most of your mortgage and auto loans, and stop alimony payments to your two ex-wives. You could cut your salary in half and survive. It has nothing to do with the genius of Ed Whitacre.

Instead, GM launches a whole bunch of new products, all of which were designed and engineered as part of the old GM, that just happen to be pretty darn good (thanks to Bob Lutz and Ed Welburn).  Think Camaro, new Equinox, new SRX, and new Lacrosse, and maybe even the upcoming Cruze.  On top of that, GM has a potential technological “tour de force” in the new Volt that could possibly anoint GM as the “King of Green.”  Oh yeah, GM comes out of bankruptcy during one of the deepest recession in automotive sales in history (relative to the trend line) and start selling again into an upswing.  Then its major competitor, Toyota, stubs its entire foot by ignoring a major design flaw that results in death and dismemberment of several US citizens including a California highway patrolman and family.

Even so, GM’s market share remains flatlined mostly at around 18%.  But it’s enough share (and volume) that it pays back $6.7 billion of government debt through an escrow fund set up for extraordinary expenses that was barely tapped – and that’s only because the terms of that extra funding required it to be applied against the debt if it wasn’t used for emergencies.  Whitacre goes on TV and dupes the public without revealing the true nature of the repayment. That’s like using the estate money you inherited – which was never your money in the first place – to pay off your bookie… but you tell your third wife she can keep her diamond ring and now she thinks you’re her hero.

GM reports its first quarter earnings and, surprise, it makes money in North America for the first time in years.  And it even manages to reduce losses in Europe while its China JV’s hum along nicely as before.  The future looks bright – time to put on the shades.  It’s so bright that the GM top executives look to reward themselves some $13 million in restricted stock for just being in the right place at the right time – and by coasting off of new products designed before some of them even knew they’d be in Detroit.

But what’s really driving the IPO is not the requirement to raise capital for GM.  Instead, it’s a combination of factors, mostly the need for the Obama Administration to win political points before the November elections.  A market value on the Treasury holdings – most of which it will still own even after the IPO – will make headlines all by itself and prove to the taxpayers that the Government Motors moniker is no more.  Second, Wall Street investment banks see huge fees of the IPO and secondary offerings of what will be one of the larger stock issuances of all times.  Third, Ed Whitacre (and other insiders) wants to proclaim victory and put a value on shareholdings.

What about that value? Here’s what the Congressional TARP Oversight Panel has to say on the topic:

The valuation of New GM used by the bankruptcy court estimated that the market capitalization (the price of all outstanding shares) of the new entity would be worth between $59 and $77 billion in 2012. Treasury has invested a combined $49.5 billion in the New and Old GM and approximately 61 percent of equity in New GM.280 Assuming full repayment of the $8.8 billion note and preferred stock issued by New GM to Treasury, the shares in New GM will have to be worth $40.7 billion (the difference between $49.5 billion and $8.8 billion) for Treasury‟s investment to be repaid when Treasury sells its shares, meaning the market capitalization of the entire company needs to be worth $67.7 billion. In April 2000, when Old GM shares were at the height of their value (not adjusted for inflation), the company‟s total value was only $57.2 billion. In other words, New GM will have to achieve a capitalization that is higher than was ever achieved by Old GM if taxpayers are to break even.

GM is still in turnaround mode.  Yes, it will pull off an IPO – likely by early in the fourth quarter this year – and will garner accolades from Obama, Wall Street, and even some competitors for its remarkable story.  But GM still faces a massive problem in Europe – Opel/Vauxhall has been a perennial laggard in a market that now looks to be moribund for years.  The new executive team hasn’t yet sold a car that it has designed and developed for North America.  And we’re still trying to decipher the playbook of the four brands in North America.  The IPO is merely a swap of stakeholders in the company – from the government to the public – but there’s still little there to tell us whether or not GM in the future will be a winner.  Place your bets!

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44 Comments on “Editorial: The Truth About GM’s IPO...”

  • avatar

    “In April 2000, when Old GM shares were at the height of their value (not adjusted for inflation), the company‟s total value was only $57.2 billion. ”

    If I assume a 2% annual inflation, it results in 57.2 * 1.02^10 = 69.7

    At 40.7, this means New GM is worth 58% of GM at its apogee. Is it reasonable?

  • avatar

    There will be 3 types of GM stock investors:

    1) Pension funds under political pressure to buy.
    2) Sucker who truly believe in a recovery.
    3) Speculators betting on a quick profit due to the suckers’ buy in.

  • avatar

    I don’t know that the government(s) ever expected to make money. Getting most of the money back would be a plus. Saving the jobs is a plus. There’s nothing wrong with establishing a market value on our investment.

    • 0 avatar

      1) Don’t even think about making money.

      2) The GM bailout destroyed jobs:
      Injecting money into the economy does create jobs, but taking money out of the economy (in the form of bailout resulting in tax or debt) destroys jobs at the same time. So it’s a wash if done perfectly. Since there will be lots of overhead and corruption, the net result will be destroying jobs.

      3) No, it’s not your investment. It your money taken at gun point.

    • 0 avatar

      I didn’t see any guns…did you?
      When people say things like this (along with other misnomers such as Pro-Abortion, Obama-care, etc) you are just exaggerating your point by saying untrue things in order to scare or mislead.
      Let’s talk about the facts as they are, scare tactics should be above the B & B.

    • 0 avatar

      You are right. It wasn’t a robbery at gun point. It was a burglary. The union wenches used our politicans (which are in their pockets), to take our money without us having any say in it. Poof your money is gone.

      And because jobs remained at GM, new jobs were not created at other companies that would have met demand, like Toyota and Honda. Those companies make cars in the USA and their employees pay into social security.
      Bailouts don’t create jobs, they reallocate jobs from one place to another. A total waste of taxpayer money.

      GM makes their cars in canada Mexico and especially Korea.

    • 0 avatar

      Yes I do.

      If you refuse to pay tax for the bailout, the IRA will make sure your property is auctioned off. If you try to protect your own property with force, they will send in the cops and get your money at gun point.

    • 0 avatar

      wsn –

      If the government didn’t spend money on this, they would have spent it on something else. I’d rather it go to helping American companies recover from an unexpected financial cataclysm than go to another bridge to nowhere in Alaska or a state of the art communications center in Afghanistan just so the locals can blow it up as soon as we finish it.

      As far as your tax argument – you are free not pay for this in your taxes, just emigrate to another country. The majority of this country voted in an administration that chose to spend the money, and they have every legal right to do it. If you disagree, get out or stick it out like everyone who disagreed with Bush did when he was in office, and exercise your power to vote someone else in when the time runs around.

      As for me, so far I’m not paying any more in taxes than I used to, GM on the federal teat has led to a bunch of new sales for my dealership so I’m making more than I did before, and this administration set it up so that I got $8,000 back just for buying a house when I was already getting a great deal due to interest rates and housing prices being at the bottom of the barrel. I have no complaints, and neither do a lot of others.

    • 0 avatar

      That is the problem. We are not supposed to be able to, with a simply majority, have a politician steal other peoples money and give it to us. Taxes are for the purpose of protecting individual rights.

    • 0 avatar

      It’s not theft anymore than any other taxes are theft. I don’t necessarily think my taxes are too high or that the government spends too much, but I do think that the government is fairly inefficient in the way that it spends a lot of the money.

      I think we should have free healthcare for all citizens, free high quality K-12 education, police departments that exist to protect and serve the people like it says on the cars, not exist to enforce petty fines for revenue through red-light cameras and stick people with sex offender lables for public urination, we should have roads free of potholes, and beaches free of oil. All of those things are easily in our reach with the amount of tax revenue we already have, it just needs to be spent smarter.

      The outrage shouldn’t be what programs out elected officials decide to fund, but how efficiently, or inefficiently as is often the case, those programs are implemented.

    • 0 avatar

      Conslaw, did you just call the $50-60B thrown at GM an investment? Surely, you jest. It may indeed work out that we get our money back, but let’s not play fast and loose with calling that an investment.


      “I think we should have free healthcare for all citizens, free high quality K-12 education, police departments that exist to protect and serve the people like it says on the cars.. All of those things are easily in our reach with the amount of tax revenue we already have, it just needs to be spent smarter. ”

      Define free.

      There’s no real waste in our system of crony capitalism. ‘Waste’ is a convenient, less truthful descriptor. You mean bought off, and it doesn’t matter if it’s Pfizer, GM, UAW, etc. the vast majority of our politicians are bought. How many times has the head of SEIU visited the White House? How much did Ted Stevens accept in under the table services for building that house in Alaska? How much ‘stuff’ was loaded into the $250B highway bill that had nothing to do with, well, highways? How much money and coke was given to the inspectors supposedly there to ensure safety of oil rigs?

      It’s got nothing to do with money being spent smarter. It’s got to do with a complete ethics black hole that exists in most of our elected officials who care more for their buddies than doing what’s in the best interest of those that elected them.

    • 0 avatar

      jkross –

      I’d define kickbacks, bribes, contracts going to buddies instead of who can get the job done the best for the least amount of money, quid pro quo with lobbyists, and backroom dealing in general as waste.

      Of course, there are other forms of waste too. Public schools get grant money that they have to spend on certain things, whether it be computers, reading specialists, or whatever else it may be earmarked for even though those things might not fit the needs of their students, that’s certainly waste. States get a certain amount of money to maintain and upkeep roads, and sometimes have to spend it on certain types of roads, perhaps highways instead of city streets, whether those highways need resurfacing or not, that’s waste too. Police departments get funding tied to specific goals – maybe anti-terrorism or the laughable war on drugs, even though that particular area and department might be much better served spending that money on sometime more pressing to that community, and that is also waste.

      Fixing all of that won’t be easy, in fact I’m sure it would be a hell of a lot harder than starting another sweeping grandiose national program. The biggest problem in government however is exactly that type of thinking, that something is only worth doing if it makes national headlines and ensures a legacy. The people working in the front lines of local government, schools, parks, departments of transportation, utilities, etc, need to have their voices heard and be given the power to do things right for their community. There is a fundamental disconnect between the top levels of goverment who make the decisions about who gets money and for what, and the people at the bottom who actually spend it for the welfare of all of the citizens. It’s time to overhaul the nitty-gritty day to day operations of every state, county, city, and town in this country and make things start to work right from the bottom up.

      I’d also love to see a ban on lobbyists in general and real campaign finance reform. The best way to do the latter, at least in my opinion, is to set a much lower cap on funds that can be spent for each level of office that a candidate might run for. Eliminate fundraising almost altogether, and with it the corruption that comes with having to please the donors. Mayoral candidates may only be allowed to spend $10,000 on their campaign total, Gubernatorial candidates $100,000, and Presidential perhaps $1,000,000. Give each candidate a mandated and equal amount of public exposure, networks have to donate a certain time for debates and all candidates have equal opportunity to have their voices and opinions heard. It should be the candidate with the best ideas who wins, not the one who sells his soul the fastest to saturate the market with ads and name recognition.

      Finally, I’d define free healthcare as free, but supported by taxes, just like ours schools. If you are a citizen of the USA, you have the right to go into any hospital or doctor’s office and get whatever is wrong checked out and fixed without paying an additional dime out of pocket. Now, obviously there would have to be some limits, just as public education doesn’t cover the cost of field trips, musical instruments, or football jerseys, even though those activities are associated with school, purely voluntary procedures like breast augmentation or facelifts would have to come out of the recipients pockets. At the end of the day though, a cancer or other serious illness diagnosis shouldn’t be able to financially deplete a person to the brink of bankruptcy, as it often currently does, even if they do have insurance.

    • 0 avatar

      – NulloModo

      The problem with your socialist ideas is that eventually you will run out of other peoples money to spend.

      You talk about all these programs to be funded by taxes. All these “rights” that Americans have. Our taxes cannot possibly.

    • 0 avatar


      Holding up schools as an example to follow is a big mistake. I know it’s regional, but on the whole, our tax funded school system is failing precisely because it’s spending money in the wrong places and rewards mediocrity. Not to mention teacher’s unions who have fought tooth and nail against charter schools… schools that on the whole, outperform their unionized neighbors.

      And that’s why the rotary engine is bound to make a huge comeback!

    • 0 avatar


      While I share some ideas with socialists, I wouldn’t call myself socialist overall. I still believe in free enterprise for the most part, but certain things like medical care and education should be removed from that and guaranteed to everyone even if the government has to lose money to do it.

      As far as being able to afford it all, that is what I have been talking about all along, of course we could afford it all if we put our money towards things that matter in an intelligent way instead of letting
      the current system bleed money like a sieve due to kickbacks, ego projects, and plain old mismanagement. If we still need more money, there is always raising the tax rates on the rich, who still pay far far less a percentage of their income than they did 50 years ago.

      We could also just legalize marijuana and tax the hell out of it, as well as raise taxes on alcohol and cigarettes. You kill two birds with one stone there – lowering smoking and alcohol abuse rates, and making more money. I smoked for five years, and those arrogant ‘truth’ ads just solidified my resolve to exercise my right to do so. When they kept bumping the tax on smokes such that I was suddenly spending over $300 a month though, I found a way to quit.

      jkross –

      Our schools aren’t perfect, and indeed a lot are in genuine trouble. For the most part though the issues aren’t a lack of money for the school system, the teachers, or the unions. The big problems are lack of involvement from the parents and government promoted mediocrity.

      Ask anyone who has taught for even a single year what the biggest deciding factor in the success of a student is and you will get the same answer – support and involvement from the parents at home. When I was in school I would have gotten my rear end beaten or at least grounded if I ever came home with a C or a lower grade on my report card or got a detention/suspension at school. Nowadays, instead of parents backing the teachers up and getting their kids in line, the parents are arguing with the teachers and trying to get special treatment for their little angels.

      Charter schools succeed more for one simple reason – to get your kid into a charter school you have to show at least some interest and support for their education.

    • 0 avatar
      John Horner

      “Taxes are for the purpose of protecting individual rights.”

      Nonsense, pure and simple.

    • 0 avatar

      “The big problems are lack of involvement from the parents and government promoted mediocrity.”

      Exactly, so let’s fix the public policy side of the equation, give everyone a voucher and let parents who care have a choice. The current system hurts two groups of people the most – parents and kids that care and parents living in a part of town with bad schools.

      The government run schools are punishing high performers in the interest of protecting the teacher’s unions.

      The same gov’t that propped up the weakest players in the auto industry all to help protect UAW jobs.

      See any patterns?

  • avatar

    I’m not so sure GM will be able to pull off an IPO. Nor Tesla Motors.

    Neither of those companies would be around today without massive government infusions. Any one who invests in their stock will be banking on that support to continue. Shameful as it is, it probably will.

  • avatar

    I think I root for GM cause I remember what it was, and I’m a student enough of history to know what they could be, but I’m not in love with what they are. I want to see them do well cause it’s my tax money and cause I know people who directly depend on them for jobs, but I’m not going to buy a car just cause it’s a GM if I can find a better product for a price that I consider to be a better value. Am I the only one?

    It seems like so many on here are either tea party-ers who think that Obama is Satan and want to organize a boycott of GM, or total fanboys who think GM can do no wrong.

    • 0 avatar

      Dan, your well-written post started me thinking… why do I hate Gov’t Motors so much? I mean really, what impact does GM’s existence have on my life one way or another?

      It comes down to this for me: GM has no real reason to exist in today’s marketplace, other than as a jobs program for the UAW.

      Is there a single GM model on the market that offers an overwhelmingly compelling reason to purchase it, over a competitor in that segment? For reasons other than misguided jingoism?

      Think about it — which is a better vehicle, the Malibu or Accord? Or the 2010 Hyundai Sonata? Or even the Fusion?

      Which is superior, the Silverado or Ford F-Series?

      The Impala, or Ford Taurus?

      The Lucerne, or Toyota Avalon?

      The Enclave, or Honda Pilot?

      The CTS, or BMW 5-Series?

      Not that any of those GM vehicles is truly awful; in fact, most are decent enough, and all have their strengths. But are any of them truly the best? Or even in the top 3 in their segments?

      The only vehicle I can think of that is markedly superior to its competition is the Corvette, and that’s only because of price. A ‘Vette is a hell of a car for less than $60,000. But one vehicle is no reason to keep GM around.

      Which comes back to that “jobs program” angle. The feds only kept GM around to save jobs. That’s not a good enough reason for me, especially at the price it cost each and every one of us.

      Even though I’m only in my mid-30s, I’ve been to enough classic automobile shows to recognize there was a time when GM was truly superior.

      That time passed 30 years ago. It took another 20 for the market determine GM wasn’t competitive. Today, the company is better… but nowhere near good enough to blow $60 billion on.

      It’s a lot cheaper to buy a Sonata, and likely a more satisfying ownership experience as well.

  • avatar
    Tommy Boy

    >>There will be 3 types of GM stock investors:

    1) Pension funds under political pressure to buy.
    2) Sucker who truly believe in a recovery.
    3) Speculators betting on a quick profit due to the suckers’ buy in.

    Not just pension funds, but TARP banks (and their proprietary mutual funds) under political pressure to buy (and other Wall Street firms seeking political favor).

    So much for fulfilling their fiduciary obligations to their pension plan participants, clients and customers!

    GM will be a terrible investment — you still have the UAW on the premises, and given how Obama stiffed the previous investors in order to “reward” the UAW, why would any savvy investor purchase GM stock (or today that of any unionized company, for that matter)? Perhaps for a short-term trading opportunity, but definitely not as an investment.

  • avatar

    Will there be controls on the IPO to prevent evil capitalists (like Jerry York) from obtaining a majority / controlling interest?

    What would it take? 10-20 Billion?

    Has the Cerberus example scared away Private Equity?

    Or are there potential legal kneecapping consequences from the current majority stakeholder?

    • 0 avatar

      Will there be controls on the IPO to prevent evil capitalists (like Jerry York) from obtaining a majority / controlling interest?

      Well, in Jerry York’s case, death.

      Although you never know: venture capitalist is only a few letters from (and ideologically akin to) vampire capitalist.

    • 0 avatar

      Jerry York was a first class gentleman and your reference to him out of line.

  • avatar

    1) By law pension funds are only allowed to invest funds in certain assets depending on ratings, IPO stock offerings are not one of them.

    2) The initial stock price will be determined by the investment banks who own/guarantee a floor price for the block of shares being offered, they take the upside or eat the downside (they’re usually pretty good at pricing in a manner where they do not have a downside).

    3) Buying Ford at $1.25/share was characterized as a “horrible investment”, they would never make it (worked out well for me, my 3 year old will be able to pick any university in the world he wants to attend), and they still have the UAW, etc.

    4) As I mentioned the other day, all of the GM hate is well deserved, but all of a sudden certain other automakers are going to be forced to play with the short squad, what are they going to do that GM didn’t try and do in the last 20 years?

    5) Some people think that Acura makes nice cars.

    6) Yes the GM bailout probably cost quite a few temporary jobs in Japan.

  • avatar

    “The IPO is merely a swap of stakeholders in the company – from the government to the public…”

    So what you really mean is a swap of stakeholders from the unwilling public (government) to the willing public (shareholders). After all government money is public money.

  • avatar

    Reply to WSN:

    When markets are working, they create jobs. When markets break down, there is wasted capacity. That costs jobs down the line.

    In the fall of 2008, markets broke down. The government had to “prime the pump” to keep financial markets from collapsing and keep the US out of a full-blown depression. Propping up GM and Chrysler kept whole communities afloat, and it was a lot cheaper than the social welfare money that would have had to be thrown at these communities later. The money spent to prop up GM and Chrysler was chicken feed compared to what we spent to prop up AIG etc., and the auto bailout money did a lot more to keep mainstreet going.

    • 0 avatar

      It kept some communities afloat at the expense of other communities.

      $50B just to save 50k jobs? That’s one fxcking million per job. That’s not what I would call efficient job creation.

      I can use that one million to “employ” 10 people for $3k/per month for almost 3 years straight without needing them to work at all.

  • avatar

    “Think Camaro, new Equinox, new SRX, and new Lacrosse, and maybe even the upcoming Cruze. On top of that, GM has a potential technological “tour de force” in the new Volt that could possibly anoint GM as the “King of Green.””

    The Camaro is quickly relieving years of pent-up demand for a car by that name. Its sales were recently ecliped by the new Mustang, so the battle continues.

    The Cruze appears to be a nice car, but it’s priced too high to compete effectively. It won’t offer anything to stop Hyundai’s momentum, for instance.

    The Volt is a technological wonder, but I think only true believers will be willing to pay $32k (after incentives) for that car. When the truth about its highway mileage comes out, combined with the drudgery of the duel-fuel requirement, I don’t think it will fare so well. Moreover, GM has already admitted that it will be an unprofitable car. So the more they sell, the more they lose. The breakeven volume is probably very high.

    The best part about GM’s IPO is that we can then stop calling them “Government Motors”, even if the bailout money doesn’t return. I want GM to succeed, but on their own merits. But I’m very pessimistic about their long-term survival because so much of the internal machinery remains from the Bad Old Days.

  • avatar

    The scam has a name, “pump and dump”, look the term up and tell me that isn’t exactly what is happening now with GM IPO talk. It’s been done thousands of times over the years and there are a good many people in prison now over pump and dump schemes. Bet no one goes to prison over this one.

  • avatar

    I’m personally interested in seeing how the main-stream media will handle this GM IPO…

    There are obvious political ramifications for the Obama administration on the success and failure of this. The questionable mathematics of this is fairly simple, especially if you include the bailouts given to GMAC as well. The general misinformation that has been spread with the payback of GM’s $6.7B government debt as a good example of this.

    The polarization of American media to advocate a political viewpoint and spin news stories have become increasingly blatant (from both sides of the political spectrum).

    The conspiring of political forces and media forces to project what is essentially mild-propaganda is a commonality, and reality, in the most of the world.

    How the main stream media handles this will be a litmus test: will it be projected as a victory for the Obama administration? Or will more fundamental mathematics of GM and its IPO be examined as well?

  • avatar
    Paul Niedermeyer

    In April 2000, when Old GM shares were at the height of their value (not adjusted for inflation), the company‟s total value was only $57.2 billion. In other words, New GM will have to achieve a capitalization that is higher than was ever achieved by Old GM if taxpayers are to break even.
    There’s a serious flaw in this line, and one that resonates throughout this editorial. GM’s peak market value happened many decades earlier, in 1965, not in 2000. The key shortcoming to the comparison to old GM’s stock price/market cap is the lack of inflation indexing to determine GM’s market value. I tackled this problem a year ago here: Inflation adjusted, GM’s highest stock price was $358 in 1965. If GM had as many shares outstanding then then in 2000 (I couldn’t verify that, but it probably was similar), then GM’s market value in 1965 was some $200 billion.
    1955-1965 were GM’s peak years in profits and share price/market cap. GM was truly healthy then, unlike the artificial boost it had in its share price in 2000 due to the stock market bubble and short-lived SUV profits. So the proposed market value of the (healthy) New GM should be compared to the $200 billion market cap of a healthy GM of 1965. In that comparison, the projected market cap of $67 billion doesn’t look so out of line.

  • avatar
    Kevin Kluttz

    Tommy should be the ONLY person interested in GM cars OR their IPO. And he could probably drive better than most GM drivers, too!

    (That deaf, dumb and blind kid sure plays a mean pinball….)

  • avatar

    Alright ! Fed is putting lipstick on this pig by doing an IPO. I cannot wait to short this sucker assuming the uptick rule doesn’t stop me. Free market rules !

  • avatar

    if Ewanick can fix the marketing GM will be just fine.

  • avatar
    John Horner

    “For starters, GM’s “turnaround” is mostly a result of the balance sheet restructuring. By eliminating its onerous debt load, transferring a good portion of its UAW VEBA obligation from debt to equity, and killing four brands along with eliminating a bunch of unnecessary assets (like NUMMI), it greatly lowered its operating breakeven level in North America.”

    That is the whole point of bankruptcy restructurings, to eliminate enough debt that the surviving organization has a chance to succeed while replacing that debt with equity so that the debt holders have a chance of recovering something.

    As to the argument that the new management is simply reaping the product benefits of the old team, what about the designers and engineers who actually did the day to day development work on those new models? Most of them would be on unemployment right now were it not for the government’s intervention.

    Now, what I want to know is how Iraq and Afghanistan are going to repay the trillion plus dollars and thousands of lives poured down those rat holes.

    • 0 avatar


      Your point about the designers and engineers is a good one… perhaps they should be the ones getting the stock in the new company to retain the top talent that you’re describing, no? After all, if it’s the product that will turn GM around, they should be the primary beneficiary of company performance, not the government installed board and CEO. They were the people taking the biggest risk, as they too have families to support and undoubtedly knew they were risking everything to stay with GM. We need to reward our ‘investment’ in GM and enusre these people stay. Where’s the pay czar to ensure the fairness that we expect from the government?

      Oh, that’s right! Those designers and engineers are not union members. Ah, screw ’em then. They’re no more worthy than the bondholders, many of which invested significant portions of their retirement in GM to see it all evaporate through GM’s faux bankruptcy. We just need to make sure that those UAW members with the fat pensions and heavily subsidized healthcare are taken care of for life.

  • avatar

    “Taxes are for the purpose of protecting individual rights.”

    Nonsense, pure and simple.

    Mr. Horner, Doc was absolutely right about that first line, and you’re absolutely wrong with the second. Read the Declaration of Independence:

    “…We hold these truths to be self evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights… that to secure these rights, governments are instituted among men…”

    There’s an old saying, “France is a Land, Britain is a People, America is an Idea.” The words in the Declaration above express the American Idea. Commenters here from other countries don’t have to believe it, but any American who doesn’t believe it is ignorant of his own country.

    The American Idea is on-topic in any discussion of American government involvement with the auto industry, or any industry. Americans may not explicitly remember the lesson from civics classes, but the widely felt unease with bailouts of all types indicates the American public has absorbed the lesson, and still views its government as limited in nature and purpose.

    Mr. Horner, if you’re not an American, please refrain from attacking the fundamental underpinnings of the American state. If you ARE an American, pick up an American history book and READ it.

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  • Urlik: Seatbelt pretensioners, not airbag pretensioners. Need a headline correction.
  • tmvette454: All it needs is some whiskers and could be a catfish
  • jalop1991: If they don’t use Mr. T in the ads, they’re missing the boat.
  • sgeffe: Why’d I think the K5 was still the Optima?! Yes, I’d assume that one is next.

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