General Motors is no longer ‘Government Motors,’ if it ever was. So why won’t the Obama administration sell its GM stock?
Apr 2, 2012, Vol. 17, No. 28 • By FRED BARNES
In November 2009, the GM board reversed its decision to sell its European car division. That division’s main car, the Opel, is built in Germany, and the sudden change of plans caused a bitter backlash in Germany and embarrassed the White House. German chancellor Angela Merkel, who had approved the sale, was visiting with Obama when the decision to keep GM Europe was announced.
Eight months later, GM acquired AmeriCredit to, as its press release said, “meet customer demand for leasing and non-prime financing for GM vehicles.” This put GM in direct competition with its former financing arm, GMAC, now known as Ally. The government owns a large chunk of Ally stock.
Despite these displays of independence, GM has been unable to escape Obama’s shadow. The problem here is Obama. He treats GM as an adopted child, the Volt as his pet vehicle. He’s visited three GM plants as president. Speaking to a UAW audience in Washington in February, Obama recalled getting “inside a brand new Chevy Volt fresh off the line. . . . It was nice. I’ll bet it drives real good.” He actually drove it 10 feet.
Obama said the Secret Service wouldn’t let him take the Volt out for a spin. But, he promised, “five years from now when I’m not president anymore, I’ll buy one and drive it myself.” Then last October, he toured the GM plant in Lake Orion, Michigan, 30 miles north of Detroit, and plugged the subcompact Sonic. “You’ve got to sit in that car,” he said. “There’s a lot of room in there, even for a pretty tall guy like me.”
That’s not all. In his stump speeches, the president applauds himself for making the “unpopular” decision to “help the auto industry retool [and] prevent its collapse,” as he put it in Chicago in January. He doesn’t mention President George W. Bush, who provided the initial bailout funds. In his memoir, Decision Points, Bush said he told Obama just after he’d been elected, “I wouldn’t let the automakers fail. I won’t dump this mess on him.”
GM officials wince at Obama’s references, fearing he’s politicizing their company and keeping alive the Government Motors stigma. “I hated that name,” Whitacre, now retired, says. “I still hate it. It was very harmful to the company.”
No doubt Obama thinks he’s aiding GM. He’s not. “If you talk to these [GM] guys privately, they can’t get out from under the government fast enough,” says Daniel Howes of the Detroit News. But Obama won’t let go. He took another pro-Volt step in his 2013 budget, asking Congress to increase the tax credit for purchase of a green car to $10,000 from $7,500—an attention-grabbing provision that’s unlikely to pass. Obama also wants buyers to get the credit at the time of purchase, not later.
The administration’s 26 percent of GM stock gives it a hook into the company, though it hasn’t exploited its shares to interfere with corporate decisions. But when GM had an initial public offering in November 2010, the Obama team declined to sell all its shares, despite Whitacre’s pleas.
“There was so much interest in that IPO because we were making money,” Whitacre told me. He said he “begged” administration officials to “sell all their stock” and pay back more of the tab for the $50 billion bailout. “The government had the final say,” Whitacre says. It sought merely to give up its position as the majority (61 percent) stockholder.
Now the stock is underwater. The IPO opened at $33 a share. The price rose to $38 before falling to $20. Last week, it hovered between $25 and $26. At that price, the administration probably won’t unload its shares before the election. Selling now would expose how far short—roughly $14 billion—taxpayers are of being paid back in full. The stock price would have to double for taxpayers to achieve full reimbursement.
Until all the stock is sold, GM will continue to fall under the Troubled Asset Relief Program, since TARP funded the $50 billion bailout. This means salaries of top GM executives must be approved by the Treasury Department. Whitacre insists salaries are kept so low, at least by Fortune 500 standards, that GM can’t hire corporate talent from outside the company.
Though GM is a free-market company today, out of Obama’s grip since emerging from bankruptcy in July 2009, accusations about the bailout have lingered. Government intervention was unnecessary. GM could have been saved through the regular bankruptcy process. A private loan could have come to the rescue.