A Modest Proposal For How GM Can Stop Being Government Motors and Thank Taxpayers

Former Government Motors CEO Ed Whitacre – who earned notoriety two years ago when he played a starring role in the company’s fraudulent ad campaign claiming that it had repaid its bailout in full – evidently no longer wants the government as a crony in his erstwhile capitalist venture. He is telling the Obama administration to declare victory, sell its outstanding shares in the company and get out. Now. In a Wall Street Journal op-ed this morning he argues that government ownership is debilitating the company:

 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.

Seriously? How can that be? After all, didn’t President Obama -- whose “tongue,” Oprah assured, us “is dipped in unvarnished truth” -- personally, publicly and repeatedly state that he was a “reluctant shareholder” who had “zero interest in running the company.”

“Our goal is to get GM back on its feet, take a hands off approach and get out quickly,” the president said when he handed it tens of billions of taxpayer money.

And again: "GM will be run by a private board of directors and management team with a track record in American manufacturing that reflects a commitment to innovation and quality.”

Who’d have thunk it!

Whitacre is right of course that so long as TARP money is wrapped up in GM, the company will never shake its "Government Motors" image: “That label, as competitors and GM employees are keenly aware, is code for one thing: ‘GM is a failure.’”

Be that as it may, there is a slight problem with Whitacre’s proposal – namely that selling the government’s outstanding 26% equity in the company at the current stock price would translate into…. oh about $25 billion in losses for taxpayers, give or take a few billion. (This is not counting the illicit $15 billion tax writeoff the company got during bankruptcy.) Whitacre implies that there is no shame in the administration owning up to these losses. They are, after all, a small price for avoiding economic armageddon:

Since 2009, when the government stepped in with emergency funding, GM has gone from down on its knees in bankruptcy to solvent and standing strong. By that measure alone, Treasury's $50 billion gamble on General Motors has been a resounding success.

Millions of jobs were saved, along with the U.S. auto industry as a whole: GM is the backbone of the domestic vehicle business, so if the company had failed, other automakers and suppliers would likely have followed. The courageousness of that effort, which started under President Bush and continued in force under President Obama, can't be underemphasized.

But if anyone showed any courage here it wasn’t Bush or Obama but the taxpayers. So isn’t it time for GM to respond to their courage with some of its own?

Thanks to the bailout, GM, a company that was running on empty before the bailout, is sitting on $33 billion in cash reserves and has little debt – a luxury that its non-bailed out competitors who pay hundreds of millions in debt service costs annually don’t enjoy. So here’s what GM should really do if it wants to bury its label as “Government Motors” and prove that TARP has really helped it "stand strong": It should announce that it will compensate taxpayers for the losses they incur from the sale of their outstanding stock by “gifting” $25 billion of its reserves to the Treasury’s deficit reduction program. This still won't compensate them for their opportunity cost, but it'll be something!

If GM really is in good shape and has a credible business model for success, it should have no trouble obtaining a loan at competitive rates from private debt markets, just like all the other automakers are doing. If it can’t, after all the help it has gotten, then shouldn't it do the decent thing: get out of the car business?

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  • Pro Libertate||

    How is this not socialism? It doesn't matter if the government doesn't outright own 100% of the company if it controls it.

  • Heroic Mulatto||

    But...but...

    CHINA!

    or something.

    So your argument is invalid.

  • Pro Libertate||

    Oh, I see. China it is.

  • Lord Humungus||

    I'll take your China and raise you a Korea... either one.

  • ||

    Socialism? Don't you mean fascism?

  • Pro Libertate||

    Why not both? Two great hates that hate great together!

  • Tim||

    Like turkey and bacon!

  • Pro Libertate||

    Kirk and Klingons!

  • Death Rock and Skull||

    It is not worth the time to try to draw distinctions between numerous kinds of governmental contamination of trade. Socialism sums all of it up nicely.

  • ||

    It's worth it in that the people who support this shit recoil from the term fascism but not socialism. They need to be tagged with the proper term, especially if they hate it.

  • Pro Libertate||

    I'm all-recoil. Besides, the fascists were socialists in most ways, so the distinction escapes me in any meaningful sense.

  • ||

    We know that. They deny it. So let's shove it in their face repeatedly. Right, joe, you fucking fascist shitbag?

  • Pro Libertate||

    Instead of national socialism, how about partisan socialism? Replace the nationalism with partisanship and keep the socialism. Now we just need mindless devotion to the leader.

  • Pro Libertate||

    We could call them the Parzis for short.

  • ||

    It fits.

  • Pro Libertate||

    It emphasizes "party" and deeply imbeds the "parsing" they so enjoy.

  • Scarecrow Repair||

    Pronounced "Pah-zees" with a Kennedy accent.

  • Proprietist||

    "Shikha, I know you're just another Obama shill. I know you're lying about your criticisms, because you wrote an article critical of Romney the other day. You really want Obama to win and want government to run GM forever."
    - John logic

  • CampingInYourPark||

    Yes, this article is articulating a reason for an Obama defeat, although not actually saying it. Not quite 6 reasons, but feel free to add some more. It's implied. Read between the lines.

  • CampingInYourPark||

    "If it can’t, after all the help it has gotten, then shouldn't it do the decent thing: get out of the car business?"

    Oh, wait. GM is really the culprit here. False alarm.

  • ||

    Heh I was just getting ready to post something similar to this Prop. Not sure how Shikha != Romney supporter became Shikha == Obama Supporter. I guess that is the TEAM environment we will be mired in until at least the election.

  • Scruffy Nerfherder||

    I'd like to know how much the Big Three currently owe to the Fed's discount window.

  • Ryan60657||

    The $33B in cash belongs to ALL shareholders, not just uncle sam. If there was even a remote possibility of the $25B "gift" happening, GM's stock price would crater.

  • Death Rock and Skull||

    Sunk costs. Whatever advantages a private company has received from government in the past, it does not justify claiming private interest should owe anything back, and it is not an excuse to "level the playing field" by giving shit to even more industries. What's done is done. Let the market sort shit out from there without more interference.

  • Bobarian||

    If there is even a chance of the government selling their (our) shares, GM's stock price will crater.

    Forget about the extra $25B.

  • Tim||

    "She’ll go 300 hectares on a single tank of kerosene…Put it in H!"

  • Death Rock and Skull||

    They could give everyone a GM car and then go out of business. But I don't really want a GM vehicle, so they can just go out of business.

  • Loki||

    They could give everyone a GM car and then go out of business.

    "Thanks GM, I needed a worthless 2 ton lawn ornament."

  • MJGreen||

    if the company had failed, other automakers and suppliers would likely have followed

    Yes, if GM had failed, their competitors would have greatly suffered!

  • Mainer2||

    Give up $25 billion ? You mean put your money where you mouth is...good one...no one does that anymore.....mere words should be sufficient, ok.

  • Tman||

    I read this editorial this morning with my coffee and bagel and was barely able to keep them both down upon finishing the article.

    If you ever needed an answer to why GM is a terrible company that makes shitty over priced products that most people avoid like the plague, just read this article from the FORMER CEO OF GM.

    Why is anyone listening to this idiot? Isn't he part of the reason GM is a disaster in the first place?

  • Ken Shultz||

    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.

    When Wall Street said the same thing, they were denounced as greedy.

    ...and that was after they really paid the TARP money back.

  • CampingInYourPark||

    "...and that was after they really paid the TARP money back."

    I'm sure that money was used to pay down the debt, since we borrowed it to begin with.

  • The Late P Brooks||

    Millions of jobs were saved, along with the U.S. auto industry as a whole: GM is the backbone of the domestic vehicle business, so if the company had failed, other automakers and suppliers would likely have followed.

    Right.

    Also, cannibal devil-cultists. Zombies. Two headed snakes fifty feet long. Flying carnivorous rhinoceroses.

  • The Late P Brooks||

    Isn't he part of the reason GM is a disaster in the first place?

    You may be thinking of Rick Wagoner. Whitacre (not that doesn't deserve to have plenty of shit flung at him) was the placeholder installed *after* GM was nationalized.

  • R C Dean||

    So, Wagoner is the business failure, and Whitacre is the government stooge.

    Got it. Thanks.

  • Tman||

    That's what I'm saying- I know Wagoner was disaster as well, but look at GM's stock since Whitacre took over.

    Taxpayers STILL stand to lose over $15 billion in this "investment".

    I would keep my fucking mouth shut if I was him. He has zero to be proud of.

  • R C Dean||

    The "taxpayers" will neither lose nor make money on GM. No matter what happens.

  • Bobarian||

    Yes, that money is way-y-y-y-y long gone.

  • R C Dean||

    about $25 billion in losses for taxpayers

    No, no, no. The government is not the "taxpayers." When the government bought all that stock, I did not get a single share. When the government sells all that stock, I will see none of the proceeds. My bank account will not twitch by one red cent regardless of what kind of price the government gets for its stock.

    GM is not owned by taxpayers. It is owned by the government, which is much worse.

  • R C Dean||

    Millions of jobs were saved,

    How is that possible, when less than a million people work in the entire auto industry?

  • Paul.||

    Externalities.

  • LTC(ret) John||

    If GM went down, all the rest of the industries jobs would have died of broken hearts. Same with the suppliers and dealers and satellite businesses. Every car wash in North America would have closed, and the gas stations shuttered too. Mechanics would have all quit and joined the Trappist order. Bank and credit union employees that formerly dealt with autos would have committed sepuku in public squares in every city in this land. Bus and taxi drviers would have had to beg along deserted roadsides until they starved. Werewolves and zombies would roam the land feeding on the few of us to survive the crash...

  • R C Dean||

    Of course. A company that directly employed 280,000 workers in 2007 could not be reorganized in the ordinary course of bankruptcy without cratering the entire manufacturing sector.

  • The Late P Brooks||

    How is that possible, when less than a million people work in the entire auto industry?

    Waitresses at lunch counters, bartenders at lunch counters, bass boat dealers, the people who make camouflage wife-beaters....

  • wef||

    General Motors should be reorganized slightly and be elevated to be the United States Department of General Motors. Whitacre can serve as the first Secretary of General Motors and join the President's Cabinet. I offer to be the Assistant Secretary with responsibility for Chevrolet Administration.

  • The Late P Brooks||

    Silly me. I decided to read the thing in its entirety. This is what i got for my troubles:

    The U.S. government basically saved American manufacturing, and in the process gave us hope for a brighter economic future. That is the real story of the auto bailout, which I supported 100%.

    PUT THE GLASSES ON, WHITACRE!

  • Paul.||

    GM paid everything back, so... what TARP money?

  • R C Dean||

    Paulperiod is so deadpan, I can't tell when he's joking.

    http://news.investors.com/ibd-.....ailout.htm

  • Paul.||

    If you can't tell when I'm Joking RC, there's little hope for me. Little. If I haven't made my feelings known on GM, bailouts, TARP, I'm deader than Romney in November.

  • GW||

    I like how people think that even of the share price got to the point where it could be sold to offset what the taxpayers got screwed out of, that it would really matter.

    You can't just up and dump 26% of the shares without them tanking.

    Supply and demand, how does this shit work?

  • Red Rocks Rockin||

    I like how people think that even of the share price got to the point where it could be sold to offset what the taxpayers got screwed out of, that it would really matter.

    The whole premise was sold as an automotive version of the housing bubble--buy a depressed property, wait until the equity goes up, and sell it at an inflated price to the Greater Fool.

    Well, it looks like the people cheerleading this bullshit are the real suckers.

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