The executives and former executives have been quite vocal lately in their calls to be brought out from under the control of the government. Specifically, they would like the Treasury to sell their remaining shares in the company so that the government would stop dictating things such as bonuses and perks that they can give their executives. They complain that they have trouble recruiting talent with the restrictions and that it is hurting their image to be known as “Government Motors.” Well, get used to it.
If the Treasury were to sell its current stake in GM in the twenties, the taxpayers would lose billions of dollars (assuming that the share price would even stay in the mid-twenties if the Government were to dump that many shares). It is estimated that the stock would need to get to $53 per share for the government to break even. That calculation, of course, doesn’t include inflation and interest the US Government is paying on that debt, let alone the loss in opportunity for the US taxpayers to invest that money elsewhere.
I strongly opposed the bailout of the car companies. I especially didn’t like and question the legality of the way that the Bush administration diverted funds from TARP (another things the government should never have done) for the auto bailouts once it was clear they could not get a bill through Congress. Still it was done, the company agreed to it, and now we are where we are.
If GM wants to get out from under the control of the Government, get to work building great cars that people want to buy as you claim you are doing. Find a way to make lots of money and cause your share price to go up. Maybe cut pay and benefits, starting with your executives, down to the bone and save up about $25 billion to pay the original Government loans off. Or start diverting this money to share buybacks to lift the stock price that way.
You knew the terms and you knew whom you were dealing with when you came hat-in-hand to Washington on your corporate jets. Now do what every American family needs to do when they buy one of your vehicles and take out a loan with your financing arm. Get to work and meet your obligations.
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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.