Maybe We Should Just Call it GM for Now

General Motors Chairman Ed Whitacre is letting the opinion page readers of the Wall Street Journal know he doesn’t like being called Government Motors anymore. Okay, then how about Genital Motors since Mr. Whitacre insists on acting like a dick and has the giant testicles to suggest the government take a $15 billion loss after bailing his company out just three years ago.

Three short years ago General Motors was on the verge of bankruptcy and received a fat bailout saving the company, its employees and the many industry partners it had put at risk. Now it’s complaining about government interference in running its business?

Whitacre states in his opinion piece “according to published reports  – and I claim no special knowledge here – GM is now trying to convince Treasury to sell (its stake in GM).” So as Chairman, you know nothing of this effort or these conversations? Can we also assume you had no knowledge that the Journal editors would support your view on the day before your piece was published? Or that your communications team didn’t provide the background for those published reports to the WSJ to turn up the heat on the boys in D.C.?

Of course you didn’t. How could you possibly keep track of these things when those pests administering TARP force you to check with them on everything from hiring to executive compensation and management?

I’m sure you’re just looking out for your employees, especially the “executives (who) have grown increasingly frustrated with … the stigma of being known as “Government Motors.” Not to mention, although the Wall Street Journal does, “privately, some of those executives are also irked at the continued curbs on corporate jet use.”

General Motors has rebounded. That’s great. So GM can afford to use some of its earnings to reward the government with a premium price for it shares. If not, quit whining and take your medicine like any other public company that allowed an investor to amass 26.5% ownership stake. You don’t have to pay the full $53 per share, but you can’t expect Treasury to accept the current share price. Not after the risk they took on you.

Look Ed, I feel ya man. I know you weren’t there when it happened. And nobody wants to ride the bike with training wheels. It’s embarrassing and all of the other Chairmen make fun of you in Sun Valley, Davos and all of the other places the cool executives hang out. But your bike almost fell over a few years ago and threatened to scratch up a lot of other bikes along with it. So when you’re ready to pay back the government what they paid for those training wheels, or at least a larger portion of it, you’re going to have to keep them on. And you can go out to the hangar and play in the G5, but you can’t ride it.

17 thoughts on “Maybe We Should Just Call it GM for Now

  1. Jeremy Powers says:

    The first skill of nearly all CEOs these days is kind of a rare combination of asking your employees to do more and more with nothing, expect government to bend over backwards in the direction you want it bent and stay completely out of everything else, have the customer pay a premium price for their product so you have good margins but don’t think the people you employ are worthy of rewarding well and then not get the irony of what you are doing so you can do it with a straight face and do so believably.

    When I was a reporter – back when dinosaurs walked the earth – i would frequently get these people who wanted more of some government service – veterans benefits, better roads, etc. – and then in the same breath they wanted to less pay in taxes.

    Who knew these people were going to grow up to be CEOs.

  2. PM says:

    What amazed me about the piece when i read it this morning was that the author apparently thought that most people would not think it was self-serving.

  3. PM: Of course he wants the government out. I think GM is more than welcome to buy back the shares at whatever price is agreed upon. Only a damn fool would sell for less than what the purchase price was….no comment there.

    The current stock price is a reflection of the future earnings of the company. Obviously, investors don’t see a reason to justify a higher stock price at this point. That’s the way markets work. He then needs to convince investors that they are wrong. That onus is on him and the company.

    The beauty of relatively free markets is that people can vote with their patronage. Don’t like GM cars, don’t buy them. Don’t like an Iphone. Buy a Samsung.

    Far better the masses making the decision than a few bureaucrats. It’s why Obama’s directors and czars and panels worry me.

    1. PM says:

      OK, Mike:
      I generally agree with you. And if the government (the investor in question) doesn’t like the price, then they don;t have to sell, right?

      So the government should wait, because they don’t like the price (or maybe they are concerned about their fiduciary responsibility to the citizens–the shareholders of the government).

      In Russia, with the end of communism, the shares of state held companies were distributed to the people, who then sold to management at huge discounts creating the current oligopolies. Not a good thing. Not something we should reprise.

      Efficient markets are not natural, not automatic. They require regulations and fairness…ie., government.

      1. Erik says:

        The new GM stock is never going to reach its issue price. NEVER. And there ought to be some doubts that it will ever spike above where it is now. It’s not irrational for the govt to liquidate its stake and just take whatever cash can be had … rather than watch that go worthless when GM goes bankrupt again in the next few years.

      2. PM says:

        Efficient markets require equal and broad based access to information….insider trading is an example of an inefficient market.

  4. Chris Werle says:

    Erik I completely agree. It is Treasury’s decision and they may very well look back and regret not divesting at the IPO price. I still find it extremely funny when Whitacre and others make the case that the government’s investment is what is tagging GM as a failure and it should get out for much less than it originally invested. If GM wanted them out, shouldn’t they pay a little
    for that freedom.

  5. The simple fact of the matter is that we don’t know what GMs stock price will be in the future. Period. So certain it will fall? Short it, then. Certain it will rise? Go long.

    The government is under no obligation to sell its shares and shouldn’t be.

    Look, America invented and then mastered restructuring as a core business practice. We do it better than any country, more efficiently and it does save jobs, save companies and contribute to the economy. Yes, the vultures and turnaround artisits play a critical role in our economy, and they often do it better than the government.

    This is where the private sector is far better than government at discerning public demand and future fortunes of a company. I simply don’t believe the folks at Treasury have any ability to know whether it is more feasible to sell now or later. There are people, like those I mention above, who do know.

    Here is the math. The government invested about $51 billion in GM and about half has been paid back via cash, buyback of common stock, preferred stock and payment of dividends and interest. That leaves about $25 billion or so to be paid back. If the treasury sells all of its stock back now, it walks away with about a $12 billion loss.

    What is being argued is cutting losses there or at $25 billion if the stock goes to zero, a valid argument. Like them or not, an I’m not a huge fan, some of the government bailouts, AIG and others, have worked and those companies have shed business units, costs, jobs and other things and have returned to becoming going concerns, while paying taxpayers back.

    The real question is: Is GM capable of making cars people will buy…not politically correct, environmentally friendly cars that are mandated.

  6. Newt says:

    The Trabant is a car that was produced by former East German auto maker VEB Sachsenring Automobilwerke Zwickau in Zwickau, Sachsen.

    With its mediocre performance, outdated and inefficient two-stroke engine (which returned poor fuel economy for the car’s size and produced heavy exhaust), and production shortages, the Trabant is often cited as an example of the disadvantages of centralized planning.

    It is regarded as a symbol of the failed former East Germany and of the fall of communism (in former West Germany, as many East Germans streamed into West Berlin and West Germany in their Trabants after the opening of the Berlin Wall in 1989).

    Time magazine rated the Trabant as one of the 50 worst cars ever made.

    1. PM says:

      of course, the lesson here is that the Trabant was terrible because it had no competition. If you wanted a car, that was it. And that is not the case with GM currently. If GM makes terrible cars, they simply will not sell, and GM goes bankrupt–so they face the exact same market pressures as every other car manufacturer in the US.

      1. Newt says:

        The modern day Trabant is the Chevy Volt, a product of central planners in Washington.

        Eastern Europe teaches us everything we need to know about GM’s future.

      2. PM says:

        Well, rather than trying to assert that I am smarter than the market system, I’ll just sit back and see what happens……

  7. Newt says:

    In what market system does the government bail out the losers? GM needed to go bankrupt, but the central planners in Washington prevented it. And they will probably try to intercede again when GM falters next time.

    1. PM says:

      In pretty much every market system that exists in the world. As a matter of fact, i doubt that you can find a single example where that (a government bailout of some kind) has never happened.

      But you can’t escape from the reality that government playing a role in a market system is still capitalism. And no matter how many times the government might bail out GM, GM will only succeed when it makes cars that people want to buy–and GM (and its executives and employees) will have a huge incentive to do just that–to make cars that people want to buy–because they will be rewarded for that success.

      Governments can work within market systems, and they do so all of the time. You simply can not make a cogent argument that government involvement in a market system is the same thing as central planning, and every time that you do so you lose more of your credibility.

      Give it up. you can’t beat reality.

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