GM Execs Want Their Jets Back, Want Taxpayers Take A Bath
GM wants the Treasury to sell its GM shares at a huge loss, says the Wall Street Journal. Nothing doing, says the Department of the Treasury. It does not appear to need the cash (it can have it printed if needed) and is holding out for a slightly smaller loss.
Reportedly, GM offered to repurchase 200 million of the roughly 500 million shares the U.S. holds. The remaining shares would have been sold through a public stock offering.
According to the report, GM’s attempt to talk DC into dumping its stock is driven by image reasons. U.S. taxpayers kept GM afloat with a $50 billion bailout in 2009 and now own 26.5% of the Detroit company, says the WSJ, and it continues:
“But GM executives have grown increasingly frustrated with that ownership, and the stigma of being known as “Government Motors.” Executives have said the U.S.’s shadow is a drag on its reputation and hurts the company’s ability to recruit talent because of pay restrictions. Privately, executives are also irked at the continued curbs on corporate jet use.”
The folks at the RenCen will have to fly commercial and wait for pay raises a little longer. According to the Journal’s information, Washington has written off breaking even at $53 a share, but “Treasury officials would consider selling at a price in the $30s.”
At around the time the plan was floated, the GM share traded at around $20. Selling then would have incurred a loss of around $16 billion. Selling at above $30 would bring the loss into single digit billion territory.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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I'm for making the life of Akerson, and the board that selected and keeps him, as miserable as possible while they're GM employees. Given such shrewd recent calls as the tie up with PSA, and before that, keeping Opel, I'm surprised this crew has been able to decline the doubtless plethora of lucrative offers. Sacrificing by staying on at GM is due to patriotism is my guess. My hat's off to them all.
I have seen lots of situations where waiting for the stock to go up by $10, meant liquidating it after it gone down $10. Holding on doesn't change the loss. It is real. And they will acknowledge it some day, probably after the election.
The ZIRP policy and its companion QE3 are just nuts. They help the government keep overspending, but they really put it to the thrifty. Inflation may be low, especially when you ignore food and fuel costs like the feds do, but the artificially low interest rate means that even a person with $1 million invested safely has to live like a pauper. This has resulted in many older folks staying in the workforce longer than usual. From a good article about the situation: "...what serious economists have always known easy money to be: a redistribution of wealth to debtors from savers. Or, as a general rule, from the more virtuous to the less virtuous. This is true when the headline inflation rate is high, but also when it's merely higher than the predictable return on savings." http://online.wsj.com/article/SB10000872396390443524904577651161572229598.html?mod=WSJ_Opinion_LEFTTopOpinion
2012 Calendar Year to date (9/17/12): GM stock is up 16% @ $24.43 Ford stock is down 20% GM's profit margins are low compared to VW, but not much lower than most and better than many. New GM's profit margins are better than the best days for old GM. Time will tell what the stock price will go.