General Motors, Deadbeat Motors
General Motors – also known as Government Motors – is a company in crisis, straining to live up to President Obama’s campaign claim that the GM bailout is one of the administration’s most important achievements.
Government Motors is now in danger of becoming Deadbeat Motors. The government is unable to collect the $25 billion GM still owes on the $60 billion TARP and bankruptcy bailout that started in 2008. What is worse, the taxpayers may never get their money back.
The latest casualty for GM and Obama is the automaker’s slide to number two in worldwide production. Toyota regained the number one position for total sales in the first six months of 2012, a position it lost last year after the earthquake and tsunami in Japan.
Never mind. As recently as July 6 President Obama was bragging about GM’s success and the wisdom of the government bailout.
“When some folks said let’s let Detroit go bankrupt, we said no,” the president said at a campaign event. “Now GM is back at number one.”
What the president did not tell his eager followers is the sorry state of the government’s remaining 26.5% ownership in GM. It is a bad investment with little chance of ever taking it off the books,
When the Obama administration created its own GM bankruptcy scheme in 2009 it took GM shares as part of the company’s repayment for government assistance. The US Treasury sold half of its equity in the company after GM issued an IPO late in 2010 at $33 a share.
Now the stock is trading at around $20 a share. The stock price would need to reach $55 a share for the government to sell its remaining shares and get its money back. When, and even if, that will ever happen is any taxpayer’s guess.
Treasury Secretary Timothy Geithner summed it up in a burst of candor last year: “We’re going to lose money in the auto industry.”
When Obama funneled billions to GM and his allies in the United Auto Workers, he said the spending was a good investment that would not cost the taxpayers a dime. About $25 billion in underwater GM stock is not a good investment. The president bought a lemon and stuck the taxpayers with the bill.
This is consistent with the president’s pattern of picking winners and losers. The winners are always his friends who stand ready to help him win reelection. The losers are the taxpayers. Many voters look forward to balancing the political books on Election Day.