GM to fed govt: So, about ready to sell those remaining shares yet?

posted at 3:21 pm on September 17, 2012 by Erika Johnsen

After 2009′s federal $50 billion bailout to the Detroit-based car company, the U.S. taxpayer became the majority shareholder in General Motors — our public ownership stake has since slimmed down to about 27 percent, but even so, it seems that GM’s management is getting a bit weary of being so beholden to the federal government. Earlier this summer, the company floated a plan for the feds to sell off their remaining shares and end the taxpayers’ stake in the business, but the Treasury Department isn’t taking the bait. The WSJ reports:

GM executives have grown increasingly frustrated with that ownership, and the stigma of being known as “Government Motors.” Executives have said the U.S.’s shadow is a drag on its reputation and hurts the company’s ability to recruit talent because of pay restrictions. Privately, executives are also irked at the continued curbs on corporate jet use.

Earlier this summer, GM floated a plan with Treasury officials to repurchase 200 million of the roughly 500 million shares the U.S. holds in the auto maker, according to people familiar with the discussions. Under the plan, Treasury would sell the remaining shares through a public stock offering.

But Treasury officials aren’t interested in GM’s offer at the current price and aren’t in a rush to offload shares, according to people familiar with the matter. The biggest reason: A sale now would leave the government with a hefty loss on its investment.

In a nutshell: The federal government, even if they wanted to get rid of their (our!) remaining stake in GM, wouldn’t be able to do so at a profit, and the outlook for the future is not looking so good, either — especially because General Motors in finding that the federal government’s conditions of ownership are a major inhibitor to their company’s profitability? Oh, what a pickle! And, as it turns out, it appears that compensation limits actually aren’t a good idea, because income inequality is what spurs people to work hard, innovate, and compete. For anyone out there with a fondness for central planning, that’s a difficult pill to swallow, I’m sure.

As I said, though, even if the government wanted to…

There is also a political calculus. A deal at this time could be fraught for the Obama administration, which has maintained that the bailout saved hundreds of thousands of jobs at a critical time for the U.S. economy and was a win-win for business and taxpayers alike. Huge losses on taxpayer investment in the auto maker’s stock could tarnish the administration’s overall record in recovering crisis-era bailout money.

I wonder if GM isn’t regretting having entered into this almost Faustian bargain right about now.


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Obama to WTO: China is being unfair by subsidizing its auto industry!

Calling Mr. Romney.

lorien1973 on September 17, 2012 at 3:23 PM

A deal at this time could be fraught for the Obama administration, which has maintained that the bailout saved hundreds of thousands of jobs at a critical time for the U.S. economy and was a win-win for business and taxpayers alike. Huge losses on taxpayer investment in the auto maker’s stock could tarnish the administration’s overall record in recovering crisis-era bailout money.

Why would it? The media would cover for them, if they reported on it at all.

changer1701 on September 17, 2012 at 3:24 PM

Obama will just tell’em to shut-up and build a car that he wants.

The bit about the planes is particularly funny.

Jabberwock on September 17, 2012 at 3:25 PM

Selling your soul to the devil comes with a high price tag. Still love my ’72 Chevy truck.

BruthaMan on September 17, 2012 at 3:25 PM

Chicken meet Egg. So, if the gov’t wants to turn a profit (or at least not a loss) on the shares, then they will continue to hold them. But if they hold them they continue to damage GM’s reputaton and meddle with it’s product and profitabiliy.

Oh my.

NickelAndDime on September 17, 2012 at 3:26 PM

And no one saw this coming, right?

Liam on September 17, 2012 at 3:26 PM

U.S.’s shadow is a drag on its reputation and hurts the company’s ability to recruit talent because of pay restrictions.

No kidding.

You want a prosperous company which benefits its workers? You need to be able to recruit talent. Idiot OWSers just don’t get that.

You want to be in the 1%… become a talent people are willing to pay for.

mankai on September 17, 2012 at 3:28 PM

HOLY SHIITE BATMAN !!!!!!

Michigan must STILL be in Play.

Internals indeed.

FlaMurph on September 17, 2012 at 3:29 PM

Obama and Hillary will be screaming for the US to sell those shares on 1/21/2013

Headline: “Romney loses $trillions for the middle class that Obama fought so hard for”

faraway on September 17, 2012 at 3:29 PM

A sale now would leave the government with a hefty loss on its investment.

Yes, but holding onto the stock (which is steadily losing value), means that a sale in the future will leave the government (i.e. taxpayers) with an even bigger loss.

Of course, Barry will either be out of office or safely re-elected by then, and that’s all that really matters. (Or, to be more accurate, that’s all that really matters to Barry. Who cares if taxpayers get screwed out of billions of dollars, again? Barry will have gotten what he needed out of it, and that’s what counts!).

AZCoyote on September 17, 2012 at 3:31 PM

Support Ford.

Schadenfreude on September 17, 2012 at 3:33 PM

The GM oversight panel will have to get back with them on that, say in January?

Limerick on September 17, 2012 at 3:34 PM

GM Chief Executive Dan Akerson’s 2012 pay package will remain $9 million. In 2011, that comprised a $1.7 million salary and $7.3 million in stock-based incentives. Chief Executive Michael Carpenter of Ally Financial, formerly GM financing unit GMAC, is set to earn $9.5 million in total compensation. AIG CEO Robert Benmosche will make $10.5 million.

hurts the company’s ability to recruit talent because of pay restrictions. Privately, executives are also irked at the continued curbs on corporate jet use.

I am having a hard time buying into this talent problem. They were paid huge amounts of cash before the bankrupcy/bailout and that ‘talent’ wasn’t able to turn things around. That’s not real talent IMO.

Can’t fly around in the corporate jet as often as before? I am just starting to all misty eyed here.

They seem more concerned with perks than performance. Government Motors indeed.

sharrukin on September 17, 2012 at 3:34 PM

GM executives have grown increasingly frustrated with that ownership, and the stigma of being known as “Government Motors.”

Guess they didn’t think that part through before they signed on the dotted line.

Bitter Clinger on September 17, 2012 at 3:35 PM

In other words, this shameful debacle is turning out almost exactly like conservative and Libertarian critics said it would.

4 more years!!

visions on September 17, 2012 at 3:36 PM

Who would willingly ever buy a car from Genital Motors again?

Archivarix on September 17, 2012 at 3:36 PM

GM executives have grown increasingly frustrated with that ownership, and the stigma of being known as “Government Motors.”

Guess they didn’t think that part through before they signed on the dotted line.

Bitter Clinger on September 17, 2012 at 3:35 PM

Sleep with dogs, wake up with fleas…

visions on September 17, 2012 at 3:37 PM

I wonder if GM isn’t regretting having entered into this almost Faustian Fascist bargain right about now.

Fixed.

One of the marks of classic fascism is government ownership of corporations.

itsnotaboutme on September 17, 2012 at 3:37 PM

Yeah, get government out of our business so that we can stop producing this stupid Volt and sell cars that people actually want.

GarandFan on September 17, 2012 at 3:37 PM

UNEXPECTEDLY!

Bet they wish they’d just gone through bankruptcy instead of selling out their bond holders for government bailouts and knuckling under to the UAW. Mitt doesn’t look so bad now.

flataffect on September 17, 2012 at 3:41 PM

Support Ford.

Schadenfreude on September 17, 2012 at 3:33 PM

Support Fix Often Repair Daily?

Asian-designed cars are much more reliable.

Besides, buying a Ford puts money into the UAW, which puts money into the DNC, which hurts America more than sending dollars to Honda or Hyundai could.
Especially since so many Hondas & Hyundais are built here…in non-union plants.

itsnotaboutme on September 17, 2012 at 3:41 PM

I seem to recall in civics class a system of government where the government controls the means of production.

Grunt on September 17, 2012 at 3:42 PM

OT

Paul Ryan.
Take away their tax shelters so more of their money is subject to taxation

Blame the rich. Tax the top 1%.

How is that the least bit conservative?

Lower taxes on the middle class raise them on the top 1%.

Hmmmm where else have I heard that?

Steveangell on September 17, 2012 at 3:42 PM

GM executives have grown increasingly frustrated with that ownership…

Jarrett to Obama: “Sounds like it’s time for some new executives at GM. I know some out-of-work OWSers with organization and team-building experience…”

Obama: “Up-Twinkles!”

Marcola on September 17, 2012 at 3:42 PM

GM executives have grown increasingly frustrated with that ownership, and the stigma of being known as “Government Motors.”

Suspect not many in the Tea Party will buy a Government Motors car as long as it is Government Motors.

A sale now would leave the government taxpayers with a hefty loss on its investment.

Fixed.

Christian Conservative on September 17, 2012 at 3:43 PM

itsnotaboutme, you more often than not are all about you. Never! Scroom the Asians. They will be the worst masters, you just wait.

————-
GM cost counter

Schadenfreude on September 17, 2012 at 3:43 PM

AZCoyote on September 17, 2012 at 3:31 PM

What will likely happen is the government will announce ahead of time the sale. The stock will drop big time due to the large number of shares coming into the pipeline. the government will then invite all their friends and cronies to a private auction and sell the shares at the lowest price seen in the last 30 days. Will be good times, will be good times had by all who are important to the president. The government may even solyndra the whole deal by loaning the buyers the money to buy the stocks.

astonerii on September 17, 2012 at 3:48 PM

I wonder if GM isn’t regretting having entered into this almost Faustian bargain right about now.

The GM management execs may now regret it, but the union people certainly don’t, not after we taxpayers fully funded their previously virtually empty union pension coffers and gave them a huge undeserved financial stake in the company.

mydh12 on September 17, 2012 at 3:48 PM

Chicken meet Egg. So, if the gov’t wants to turn a profit (or at least not a loss) on the shares, then they will continue to hold them. But if they hold them they continue to damage GM’s reputaton and meddle with it’s product and profitabiliy.

Oh my.

NickelAndDime on September 17, 2012 at 3:26 PM

It’s not just GM’s lousy management that is keeping its stock price low and its products uncompetitive. Many of the structural problems that got GM into serious trouble in the first place still exist — despite Barry Hussein’s $50 Billion Dollar intervention.

For example, Barry’s team allowed GM’s UAW workers to keep their bloated salaries, benefits, and pensions untouched. GM’s union pension funds are still massively underfunded, and GM’s current union workers still have contracts that require them to be paid far more than non-union American auto workers at other companies.

Even if GM had great management and wonderful products in the pipeline (which it does not), GM would still be struggling to make a profit in the U.S., because it would have to price the products high enough to cover its higher labor costs.

Then there is the fact that GM is getting billions of dollars worth of tax breaks that the other auto companies are not getting (another gift from the taxpayers, courtesy of Obama). Also, the federal government is currently pumping up GM’s U.S. sales numbers by purchasing large numbers of government fleet vehicles from GM. Factors such as these are artificially enhancing GM’s domestic revenue numbers, but this can’t continue forever (and the stock market knows it).

AZCoyote on September 17, 2012 at 3:51 PM

what’s 50 Billion anyway? Barack says his is the better way forward. I believe him when he says more green energy investments are on the way for four more years!

Slade73 on September 17, 2012 at 3:52 PM

Blame the rich. Tax the top 1%.

How is that the least bit conservative?

Lower taxes on the middle class raise them on the top 1%.

Hmmmm where else have I heard that?

Steveangell on September 17, 2012 at 3:42 PM

Ryanis not a conservative. He never has been. But the rubes have been smitten by his good looks and apparent charm and thus have to load him up with accolades and feel good words like conservative.

Flat tax, make it on spending, not earning. Leave no ability to politicians to tax any items no matter how neccessary or how luxurious more or less than any other item. Make it the law of the land. Make it visible and not hidden. No rebates, no prebates, nothing but a single rate flat tax.

That would encourage savings and prevent the whole idea of taxing business. Business would be taxed on purchases of their infrastructure, but not on their raw materials. Those get taxed at the end by the actual user.

astonerii on September 17, 2012 at 3:53 PM

Meanwhile, oddly enough, today we also learn that the Obama administration is launching a complaint at the World Trade Organization over China’s allegedly unfair backing of its auto industry.

antipc on September 17, 2012 at 3:53 PM

Selling your soul to the devil comes with a high price tag. Still love my ’72 Chevy truck.

BruthaMan on September 17, 2012 at 3:25 PM

But the taxpayers are still paying the pensions of the guys who built your ’72 Chevy truck.

Obama: We can’t sell GM shares at a loss!!! We gotta recoup the money we lost on Solyndra! And we gotta buy UAW votes in Michigan and Ohio!

Steve Z on September 17, 2012 at 3:53 PM

Good thing these problems won’t to apply to Obamacare…..right?

tomg51 on September 17, 2012 at 3:54 PM

I wonder if GM isn’t regretting having entered into this almost Faustian bargain right about now.

To hell with GM. I will never consider purchasing one of its vehicles.

Cicero43 on September 17, 2012 at 3:54 PM

We should probably let the government bail out all industries then…

BlueCollarAstronaut on September 17, 2012 at 3:55 PM

it was an emergency, my sister having a baby – I jumped in my chevy volt and burst out of the garage like a golf cart on fire! No, literally, my Volt burst into flames. By sheer luck I commandeered a bicycle from a paper boy, and made even better time to the hospital.

Slade73 on September 17, 2012 at 3:58 PM

The government may even solyndra the whole deal by loaning the buyers the money to buy the stocks.

astonerii on September 17, 2012 at 3:48 PM

Wouldn’t be unprecedented.

Remember those commercials GM was running for a while, boasting that they’d paid back a lot of the money taxpayers gave them in the bailout?

What the commercial didn’t tell people was that GM used TARP money to “pay back” the loan. IOW, they used our money to pay us back!

AZCoyote on September 17, 2012 at 3:58 PM

…there’s a problem?
Oh!…who would have thought!
Joe Biden ?

KOOLAID2 on September 17, 2012 at 3:59 PM

Yeah, you have to be careful who you get in bed with – GM & the UAW own this – suck on it!!!

And don’t buy a GM vehicle…..

redguy on September 17, 2012 at 4:00 PM

it was an emergency, my sister having a baby – I jumped in my chevy volt and burst out of the garage like a golf cart on fire! No, literally, my Volt burst into flames. By sheer luck I commandeered a bicycle from a paper boy, and made even better time to the hospital.

Slade73 on September 17, 2012 at 3:58 PM

So funny.

And yet so sadly true.

Bitter Clinger on September 17, 2012 at 4:00 PM

Support Ford.

Schadenfreude on September 17, 2012 at 3:33 PM

This.

And it can’t be said enough.

ButterflyDragon on September 17, 2012 at 4:05 PM

So, if the gov’t wants to turn a profit (or at least not a loss) on the shares, then they will continue to hold them. But if they hold them they continue to damage GM’s reputaton and meddle with it’s product and profitabiliy.

Oh my.

NickelAndDime on September 17, 2012 at 3:26 PM

This is capitalist thinking! :-)

yubley on September 17, 2012 at 4:06 PM

So, GM has a branding problem?

We will never forgive Obozo for stealing OUR car company and giving it to the union.

You bet they have a branding problem.
They will stay on America’s boycott list till things change.

Typicalwhitewoman on September 17, 2012 at 4:09 PM

It serves GM right. Had they done the right thing by going bankrupt to get rid of the overbearing union pension obligations and screwing over the bondholders and dealerships, GM chose the bailout route because it looked like the more palatable way to save their company that they spent so many years destroying through mismanagement. Now stew in it, GM. Since you have yet to learn from your own mismanagement mistakes, your “bailed out” company lost half its value since coming out of government reorganization on November 2010. Back then you IPO’d at $33 per share going up to around $38/share in the following weeks. Today your shares are around $23/share. Nice going…you lost half your value in less than two years.

timberline on September 17, 2012 at 4:13 PM

But Treasury officials aren’t interested in GM’s offer at the current price and aren’t in a rush to offload shares, according to people familiar with the matter. The biggest reason: A sale now would leave the government with a hefty loss on its investment. Obama’s Reelection Campaign

There. Fixed it.

antisocial on September 17, 2012 at 4:19 PM

Support Fix Often Repair Daily?

Asian-designed cars are much more reliable.

Besides, buying a Ford puts money into the UAW, which puts money into the DNC, which hurts America more than sending dollars to Honda or Hyundai could.
Especially since so many Hondas & Hyundais are built here…in non-union plants.

itsnotaboutme on September 17, 2012 at 3:41 PM

Ummmm…I bought a Toyota that was made in Mississippi.

timberline on September 17, 2012 at 4:25 PM

Besides selling their soul to the devil, I’ll never forgive them for discontinuing Saabs.

Buttercup on September 17, 2012 at 4:30 PM

I want these deadbeats to pay back what they took. *Every* recipient of public subsidies whould be subject to a surtax on income until the public who bailed them out are made whole. And I’m not just talking companies here. Got sick but couldn’t be bothered to buty insurance? OK, we’ll pay the doctor but you’ll pay us back out of future earnings.

edshepp on September 17, 2012 at 4:32 PM

GM mgmt should get the UAW pension fund to buyout the govt at the $55 breakeven share price given the vested interest the UAW has in keeping its workers working. Then the UAW would have an incentive to get workers to postpone their retirements past the 30 year minimum — to say age 67.

(If I were Romney, I would make these a prerequisite to giving any more help to GM.)

KenInIL on September 17, 2012 at 4:34 PM

The federal government, even if they wanted to get rid of their (our!) remaining stake in GM, wouldn’t be able to do so at a profit

Goodness, owning corporations like capitalists and seeking profit on their jack-boot to the neck in ves ment?
What ever seemed socialist about this far right administration?

Don L on September 17, 2012 at 4:36 PM

All the bailout did was kick the can down the road at ridiculous cost. The underlying problems (largely the union contracts) that made them uncompetitive still exist. Chapter 11 would have allowed those contracts to be renegotiated. GM is going down again, just a matter of time.

Aviator on September 17, 2012 at 4:58 PM

Not that I’m w/GM and rewarding failure, but how much did Jamie Gorlick, Franklin Raines et al make out of running fanny/Freddie into the hugest bubble in US history?

hutch1200 on September 17, 2012 at 5:09 PM

GM executives reportedly feel the company is tainted by the stigma of bailouts.

This quote came from another website. My common response to anyone telling me how bad Ford vehicles are, I just reply, “yeah, but then Ford didn’t take the government money”. That’s usually the end of the conversation. GM made their bed, now they have to lay in it. No sympathy from me.

TulsAmerican on September 17, 2012 at 5:11 PM

astonerii on September 17, 2012 at 3:48 PM

SOmething I can agree with – and then you had to follow it up with a national sales tax argument. Don’t you remember that was one of the two positions of Mitch Daniels – and no one liked it.

Zomcon JEM on September 17, 2012 at 5:12 PM

The GM management execs may now regret it, but the union people certainly don’t, not after we taxpayers fully funded their previously virtually empty union pension coffers and gave them a huge undeserved financial stake in the company.

mydh12 on September 17, 2012 at 3:48 PM

It was always a given the union pensions would be fully-funded. After all, that is the core function of the Pension Benefit Guarantee “Corporation”. What wasn’t was the union health-care fund being made much more than whole, with already over $21 billion in cash recouped on $20.6 billion in pre-bankruptcy liabilities and another $8-9 billion likely as long as GM doesn’t go under again.

Steve Eggleston on September 17, 2012 at 5:20 PM

Support Ford.

Schadenfreude on September 17, 2012 at 3:33 PM

Support Fix Often Repair Daily?

Asian-designed cars are much more reliable.

Besides, buying a Ford puts money into the UAW, which puts money into the DNC, which hurts America more than sending dollars to Honda or Hyundai could.
Especially since so many Hondas & Hyundais are built here…in non-union plants.

itsnotaboutme on September 17, 2012 at 3:41 PM

Agreed. The greedy UAW is the real problem. If you want to buy American, buy a vehicle made in the USA by one of the American subsidiaries of a foreign manufacturer.

If you buy a greedy UAW vehicle, some of your money ends up in little Bammie’s campaign fund.

slickwillie2001 on September 17, 2012 at 5:21 PM

GM mgmt should get the UAW pension fund to buyout the govt at the $55 breakeven share price given the vested interest the UAW has in keeping its workers working. Then the UAW would have an incentive to get workers to postpone their retirements past the 30 year minimum — to say age 67.

(If I were Romney, I would make these a prerequisite to giving any more help to GM.)

KenInIL on September 17, 2012 at 4:34 PM

Lots of luck with that considering the bailout was of said pension health-care fund. The GM portion was designed to make the UAW whole on both the GM $20.6 billion and Chrysler $10.5 billion pre-bankruptcy liability, while the Chrysler portion was meant to prove that union-owned companies don’t work.

Steve Eggleston on September 17, 2012 at 5:26 PM

Obama to WTO: China is being unfair by subsidizing its auto industry!

Calling Mr. Romney.

lorien1973 on September 17, 2012 at 3:23 PM

Given Government Motors is the only American car company with significant ChiCom operations (though Ford has been recently playing “catch-up”, Pot meet Kettle.

Steve Eggleston on September 17, 2012 at 5:32 PM

I wonder if GM isn’t regretting having entered into this almost Faustian bargain right about now.

*shruggs*

The only money GM gets from me moving forward is the tax money their employee union already received.

ladyingray on September 17, 2012 at 6:13 PM

“I am altering the deal. Pray I don’t alter it any further,”

Noocyte on September 17, 2012 at 7:01 PM

GM had the opportunity to declare bankruptcy and renegotiate all of it’s contracts and obligations. It could have scrapped the union contracts and redone those deals. It could have divested itself of non-functioning or low-return units.

Instead, it chose to enter into a Devil’s pact with the Obama creatures, and it has no one to blame but itself.

I hope that GM does go bankrupt, finally, and the unions, whose greed led to this situation, end up with nothing but empty wallets and foreclosed properties.

We taxpayers must accept the fact that we will NEVER get the money back, and so cut our losses and say good riddance.

TKindred on September 17, 2012 at 7:28 PM

If Obama gets re-elected, I can predict with near-100% certainty the date Government Motors enters bankruptcy for a second time – Friday, 1/2/2015, the first business day after GM exercises its right to buy back the preferred stock the UAW holds, thus completing the $9 billion (plus any profit the UAW sees from dumping its own remaining stake in GM’s common stock) profit the UAW received from bankrupting GM the first time.

It will still be Government Motors at that point, as the Treasury will not have dumped any of its 26.5% stake. Indeed, I expect that the Treasury would participate in buying the UAW’s dumped stock.

Steve Eggleston on September 17, 2012 at 7:52 PM

You mean the folks at Government Motors finally figured out that we patriotic Americans don’t like government owned companies?! What took them so long?

No more GM or Chrysler vehicles for us. Probably not Ford either. I don’t like unions. My father was an engineer for a company that built stoves. His safety was at risk every time the union went on strike and he had to cross the picket line.

sherrimae on September 17, 2012 at 8:15 PM

The whole point of this was to give millions to the UAW. Mission accomplished. This is housekeeping after the fact. Govt. Motors can fail any time now.

Happy Nomad on September 17, 2012 at 8:20 PM