General Motors CEO Ed Whitacre made a big deal this week about GM’s repayment of the $6.7 billion in loans that the company got last year from the U.S. and Canadian governments. (GM press release here.) However, as this article points out, GM still has the $52 billion it got that was classified as equity rather than as debt. That money won’t be repaid unless and until GM does an Initial Public Offering which is large and successful enough to sell the government-owned positions at a price high enough to net $52 billion for the 73% of the stock owned by these two governments. For comparison, the total market capitalization of the Ford Motor Company is $48 billion.
Moreover, this article suggests that even some of the $6.7 billion that was repaid came from other government funds, and hence may have been “an elaborate TARP money shuffle,” in Iowa Senator Chuck Grassley’s words.
(Both links via Evolving Excellence)
Dear Ed Whitacre: You have every right to be proud of GM’s accomplishments in recent months. But you need to remember that the American people are your shareholders–many of us your unwilling shareholders–as well as your prospective customers. You and your company will be best served by a very high degree of honesty and transparency. Explicit acknowledgment of the large outstanding equity position in your press release would have been a good idea.
I have owned several GM and Chrysler cars (my first car was a 1963 Plymouth Belvedere with a push-button tranny, a 318 cu. in. V8, and a storm drain for a carburetor), but I will not be sending either company any more money until they either pay me back or deliver me a car. American Leyland? Not for me, thanks.
My first car was a beautiful yellow 1949 Dodge convertible. It had brown leather upholstery. Of course, I bought it in 1957. I wish I still had it but Chrysler/Obama products? No thank you.
Reform is coming. It works like this: when a company can’t meet it’s financial obligations it goes into bankruptcy and it’s assets are sold to meet it’s obligations. Oh, wait, that’s not reform…..
DF, my apologies for recycling here but, it seems to fit….
There is something rotten that relates to the lack of humility, the hubris, of the elite in the most recent attempts at controlling vast areas of economic activity. The present administration, with the blessing and midwifery of the past administration, claims to believe that bailouts were necessary because members of the economic community were “too big to fail”. This was/is a corruption of the system (no matter that overt direct bribes, etc. may not have actually been made). “Too big to fail” really means “too influential to fail”. It may be that the elite know too many individuals who would have become losers if these institutional failures occurred under existing financial law a matter of perception and identification (“whats good for GM” and the UAW is ….). In any case it appears to be the rule of men, not the rule of law.
You and your company will be best served by a very high degree of honesty and transparency.
Do you mean financial transparency, rhetorical transparency, both, or neither?
Both.
Both would be good. Unhappily, the new standard is neither.
Some thoughts on this from PowerLine.
Hey guys…
If you recall, I have a conflict of interest related to GM and the development of this wreck, and am sitting on a LOT that I just can’t disclose specifically. BUT I CAN point you all in the right directions…. lol.
For those interested in details related to the Kerkorian plea deal…. well, some people do the wrong thing and cop a plea, and some people do the RIGHT thing, and lose years of work and a $8 million exit deal JUST BECAUSE VIRGINIANS and BUSH ADMIN spooks and feds were lazy scum!
Good to be back….
A. Scott Crawford