Hey GM, You Made Your Bed, Now Lie In It


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.

Please contact me via vtsioriginal@yahoo.com or leave a comment.

Follow me on Twitter to get news about new articles and find out what I’m investing in.  @SmallIvy_SI

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.

3 thoughts on “Hey GM, You Made Your Bed, Now Lie In It

  1. Although I have heard the argument that bailing out GM saved many jobs (which means those people have money to spend to boost the economy) I agree with you. Some how in my gut, I know a bail-out is never the answer.

    In a free market economy, the weak should fail and be replaced my stronger companies with innovative products. You can’t tax one person and then use that money to pay another persons wage who is building a product no one wants to buy!

    • I actually don’t think that jobs were saved, in that if the need is there then the jobs will be as well. If GM had gone bankrupt and there was a need for cars, there would have been entrprenuers there to buy the equipment and the factories and give jobs to the workforce they needed to fill the need. Really what was done was to have the US taxpayer (and his children and grandchildren) make good on the unsustainable pension and benefit promises made by past GM management.

Comments appreciated! What are your thoughts? Questions?

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s