Is GM going bankrupt — again?

| August 17 2012
Hannah Thoreson

Even as President Obama and Vice President Joe Biden have both been out praising their bailout of General Motors as a “success” out on the campaign trail, the rumor is going around that GM may be going bankrupt again very soon.

From Forbes:

Right now, the government’s GM stock is worth about 39% less than it was on November 17, 2010, when the company went public at $33.00/share.  However, during the intervening time, the Dow Jones Industrial Average has risen by almost 20%, so GM shares have lost 49% of their value relative to the Dow.

It’s doubtful that the Obama administration would attempt to sell off the government’s massive position in GM while the stock price is falling.  It would be too embarrassing politically.  Accordingly, if GM shares continue to decline, it is likely that Obama would ride the stock down to zero.

GM is unlikely to go bankrupt again before the 2012 election, but should Obama win a second term, the odds that he is in the White House the next time they are filing Chapter 11 are pretty high.  The company just isn’t producing vehicles that are competitive with what similarly-priced automakers are selling.  Instead of trying to compete by improving the quality of their cars, GM’s strategy has been to offer costly incentives or finance risky subprime loans to try and move product.

What’s more is, while Dodd-Frank established the Consumer Finance Protection Bureau (CFPB) under Elizabeth Warren to keep tabs on other forms of consumer finance such as mortgages or student loans, auto loans are exempt from their watchful eye.  One has to wonder if it’s an intentional oversight, given the Obama Administration’s penchant for meddling in the world of business.  This isn’t to say that the CFPB should exist at all, it’s merely speculation that its motives are political and not altruistic as those who still believe in hope and change might be liable to claim.

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