Did you know that the Obama Administration saved Detroit? I’m not sure they’ve mentioned it enough. Or that Detroit knows it happened. But it did. General Motors is functioning and happy and completely profitable and everything is absolutely fine, you guys. Or, it’s close to fine. Or, it’s not fine. Whatever. What matters is that General Motors would really, really like it’s company back from the government. Like, right now. Because, this whole “government motors” thing is having a real effect on morale. And this was all about helping General Motors, right?
The Treasury Department is resisting General Motors’ push to for the government to sell off its stake in the auto maker, The Wall Street Journal reports. Following a $50 billion bailout in 2009, the U.S. taxpayers now own almost 27% of the company. But the newspaper said GM executives are now chafing at that, saying it hurts the company’s reputation and its ability to attract top talent due to pay restrictions.
The problem is that to sell GM back 200 million of its 500 million shares, and leave the rest open to a sort-of IPO, the government would have to take a significant loss. The share price for GM is now holding steady at around $24. In order for the government to even break even on the deal, the stock price would have to rise to at least double that. Meaning, that, although the government poured literally billions of taxpayer dollars down GM’s throat in an effort to save the company – a feat which they market at every available opportunity, allowing them to claim success for the bailout and give Jennifer Granholm something to do lest she think of herself as a real “economic advisor” – if they give up on GM now, they would cut a loss of almost $15 billion. And, they’d probably be forced to admit GM doesn’t have a stellar future.
Of course, technically, the Feds never actually expected to see any of the $44 billion they pumped into the automaker back. That’s because the money was directed at maintaining the integrity of union contracts which were at the center of GM’s financial problems. A structured bankruptcy would have forced the renegotiation of those contracts which both GM and the Feds knew were unsustainable. Unfortunately, because we bailed GM out, those contracts still exist, which is awesome from the UAW, which currently appears to use GM as little more than a very sketchy retirement program, but not the greatest deal for the taxpayers.
But, America, at least you got the Chevy Volt out of it.