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Obama to sell our GM stock at a huge loss, just weeks after campaigning that he "saved the auto industry"



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December 19, 2012
The Detroit News is reporting that the U. S. government has announced that it is getting out of the automobile businessÖat a huge loss to the American taxpayer.
The Obama administration said Wednesday it will sell 200 million shares — or 40 percent of its remaining stake in General Motors Co. — back to the automaker and announced plans to completely exit the Detroit automaker by March 2014.

The Detroit automaker said it will purchase 200 million shares of GM stock held by Treasury for $5.5 billion — or $27.50 per share — nearly $2 above the stock's closing price on Tuesday. GM shares jumped sharply on the news and were up 7.5 percent to $27.36, or $1.90, early afternoon in very heavy trading .

The U.S. Treasury, after more than a year of refusing to say when it might start selling its remaining stake in GM, said it willannounce a written plan in January to shed its remaining 300 million shares over the next 12 to 15 months, likely in a series of small stock sales.

The Treasury's move is intended to minimize the impact of the stock sale on the share price — and the government's state will shrink from 26.5 percent to less than 19 percent — but the exit could be completed far more quickly.

The exit plan may prove to be a boost to GM's lagging stock price and to some car buyers, who have avoided GM because of the "Government Motors" label.

The exit timetable signals the end of one of the most extraordinary government interventions in the U.S. economy in history — the rescue and partial nationalization of two U.S. automakers and their finance arms supported by two U.S. presidents.

Still, taxpayers will almost certainly lose billions of dollars in the $49.5 billion GM bailout - and the government would need to sell its remaining shares for about $70 each to break even. If the government sold the rest of its stock at current prices, taxpayers would lose more than $13 billion. But profits from the bank and AIG bailouts will largely offset the auto bailout losses.
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  1. reply print email
    Uh, he (and Bush) did save the auto industry
    December 20, 2012 | 02:23 AM

    Saving the industry and the hundreds of thousands of jobs (that have a GDP that most countries would admire) did cost the taxpayers, yes, but the alternative, as former president George W. Bush agreed, was not acceptable to the USA's future economy.

    Also, not only do the jobs saved by Mr's Bush and Obama still exist, but, so do the jobs of hundreds of thousands of jobs that rely on the auto industry, like area restaurants, department stores and all types of service jobs that would have laid off many if the American auto industry tanked. This was a disaster long brewing, but the past two president have done a lot to save the industry, and I believe they should be commended.

    Dale McCain

    Editor's response: We disagree. What Obama/Bush did was shaft the bond and stock holders and other creditors for the benefit of his union buddies. Bankruptcy would have saved the necessary jobs but it would have voided the union contracts. That is what Obama saved. When a company files bankruptcy that does not mean it goes out of business. Regardless, the taxpayers are getting the shaft in this deal.

  2. reply print email
    Obama Did Not Build GM...Neither Did Bush
    December 20, 2012 | 07:20 AM

    General Motors and Chrysler consist of factories, equipment, employees and product lines.  They exists to satisfy customer demands for transportation related products.

    The Bush/Obama claims that government saved the auto industry rely on the fallacy that the bankruptcy of General Motors or Chrysler would have resulted in the virtual disappearance or padlocking of the physical assest of both enterprises and that former employees of these firms and their suppliers would have become unemployed.  

    This analysis overlooks the customers.  It overlooks the unsatisfied demand that these former GM and Chrysler buyers would represent.  It fails to give any consideration to the fact that in a free market producers would have rushed to provide these customers with the products they desired and could no longer obtain from previous sources.   

    The customers who bought millions of vehicles from GM and Chrysler would still exist after bankruptcy and would have been actively sought by Toyota, Honda and Ford.  In order to quickly produce the products required by GM's former customers the remaining auto manufacturers would have immediately bought the liquidated assets of GM and Chrysler, they would have rehired any laid off employees and would have ordered new supplies from the old supply chain.  It is likely that these acquisitions would have occurred with minimum interuption in production because the profits which could be earned would have motivated efficient and timely responses from the acquiring firms.

    The government's intervention saved nothing. It created no new products and resulted in no innovation to product design or manufacture.  It merely injected politics and deficits into markets and resulted in union favorites being given unheard off preferential treatment as claims on the assets and earnings of GM and Chrysler were rearranged. It saved the weak sisters and denied  solvent and efficient auto manufactures the opportunity of expanding their influence.


    Warren Smith
  3. reply print email
    GM
    December 20, 2012 | 07:35 PM

    I agree that going to bankruptcy would have had a better result for GM and Chrysler(the unions would not have gained control) but I think it was the taxpayer who actually did the saving, after all it was our money.


    George H. Schryer
  4. reply print email
    Bankruptcy: Efficient Producers Replacing the Inefficient
    December 21, 2012 | 06:15 AM

    "Bankruptcy, though trumped up by bank and car bailout apologists as code for disappearance, really only means a positive change of ownership."


    John Tamny
  5. reply print email
    GM, Solyndra, ad infinitum
    December 22, 2012 | 06:27 AM


    Even if taxpayers recouped all of their money from the bailout, there are a slew of economic arguments against rescuing failing industries. But the more immediate problem is that we will never get our money back, anyway. 

    GM's labor costs, estimated at $56 an hour, still are higher than any of its competitors. Since the Obama administration cajoled the normal bankruptcy hearings and eradicated the pensions of nonunion workers to ensure union success, employees, like the ones at Delphi, the auto parts manufacturer and one-time GM subsidiary, took it on the chin while $26 billion of taxpayer funds were used to keep United Auto Workers in a secure position. 

    The Treasury Department has just revised its estimate upward to $25 billion in losses, and it will probably be more than that when it's all said and done. Taxpayers also suffered a $2.9 billion loss in Chrysler (the carmaker had received $12.5 billion through TARP programs) in 2011. 

    "... But really, the bailout exemplifies much of what's wrong with government. The cronyism. Wasted taxpayer money. The government's propensity to interfere with the marketplace and prop up losing propositions.
    http://reason.com/archives/2012/12/20/the-auto-bailout-failure-is-now-complete


    David Harsanyi
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