Government Motors On

Bertel Schmitt
by Bertel Schmitt
government motors on

After GM’s IPO, stockholders looked with great anxiety at the 32 percent the U.S. government still holds in General Motors. Allegedly, the U.S. government wanted to shed that share as quickly as possible, and someone dumping the stock does not make for rising stock prices. Now, GM is sending out smoke signals that a sale is far from imminent. GM’s chief spokesman Selim Bingol wrote in a blog that “the day will eventually come when the Treasury sells its GM stake. When is anybody’s guess (we have no say in the matter).”

In a perverse way, the GM stock had tanked before the U.S. government could dump it. The low stock price holds the government hostage. “At current stock prices,” writes the Detroit News, “the Treasury would incur a loss of nearly $16 billion on its bailout of GM.”

The stock currently is 24 percent below its $33 IPO price. Says the DetN:

“Given that a sale before the November presidential election would highlight the cost of the government’s rescue of GM, officials say it is unlikely the government will sell any shares before then.”

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9 of 94 comments
  • Doctor olds Doctor olds on Mar 22, 2012

    If GM Stock was sold at yesterday's closing price of $25.29, a loss of $13.85B would be realized, roughly $45 per American, and double that amount per taxpayer. Since the top 10% pay 70% of taxes, the average cost for 90% of Americans is a one time, whopping, $15 hit in the worst case, a bit less than $30 per taxpayer. There are plenty of issues to criticize in the cronyism excercised by the Auto Task Force in the structure of the deal, but the cost is quite trivial. It is not clear why folks don't understand that GM is performing very well, with operating profit over $9B last year despite Opel losses. They have well over $30B in cash generated by the business, more than enough for fixing Opel and product development. Government has not spent a dime beyond the amount used to capitalize the new business, and there is no reason to expect that to change.

    • Jkross22 Jkross22 on Mar 22, 2012

      If someone paid off my mortgage, my wife's student loans, my credit card bills and my car loan and my investment line of credit for my small business, I'd be sitting pretty, too. Claiming GM's profit as evidence of sloughing off of GM's old ways is quite a stretch. I've yet to see the evidence that GM has been rehabilitated. Ask those bondholders how they feel about GM's profits while they got shafted just a short time ago. I'm sure they would be sympathetic to your perspective.

  • Geekcarlover Geekcarlover on Mar 22, 2012

    Maybe I've misread this, and a few other articles about it, but the problem with the GM stock price seems to be a warped circular logic. The price is low because private investors won't buy because they fear the government will dump it's shares and crash the price. Government won't sell because the price is too low because private investors won't buy. Someone has got to take a hit, and I doubt any investment firm is going to go bankrupt "for the good of GM."

    • See 3 previous
    • Obruni Obruni on Mar 22, 2012

      @Pch101 it would have been better for the Gov't if its shares were in a seperate class, such as preferred. GM could then buyback the preferred stock over time, and private investors would not have to fear dilution as much.

  • Mike Kelley Mike Kelley on Mar 23, 2012

    The media are crowing about GM's present "success" as proof of Obama's competence at picking winners. Give me a break. GM's viability will only be proven if it can handle the next major downturn in car sales. Worrying about a few billion bucks seems sort of silly these days, since our government is now spending about $1.3 trillion more than it takes in every year. Here is a good article and video about the hole we are digging:

  • Carbiz Carbiz on Mar 23, 2012

    While the armchair critics are arguing ideology, Korea Inc is plotting how to take away Japan Inc's pie that they already took away from YOU. Just as you Americans are being punished for your stupidity and selfishness (or do you think the few trillion that Asian banks and citizens own of you is not going to cost you at some point?), the Japanese consumer are going to take it up the a$$ for all their suffering over the years: Toyota is thanking them for their sacrifice by moving their jobs to Thailand and Vietnam. Frankly, as my city is being bought up and paved over by Asian 'investors,' I'd rather pay double for an item built by a North American company and made here. DOUBLE. Because, in the long run, we're all going to pay anyway.