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Mail
Magazine 24…
President
Obama's General Motors
Hypocrisy
by David Harsanyi
The
Wall Street Journal reports
today that General Motors executives have asked the Treasury Department
to sell
its stake in the giant automaker. The administration has refused.
Oddly
enough, today we also learned
that the Obama administration is launching a complaint at the World
Trade
Organization over China’s allegedly unfair subsidizing of its auto
industry.
The United States will charge the Chinese government with subsidizing
auto and
auto parts producers from 2009 and 2011 to the tune of $1 billion.
(Protectionism, it seems, always becomes a vital component of economic
policy
when a candidate is campaigning in Ohio.)
Remember,
when President Barack
Obama pursues nationalization, he’s making a gutsy call and “saving”
the
American auto industry. Democrats brought up the bailout 150 times
during the
Democratic National Convention. It was such a gutsy call, in fact, that
U.S.
taxpayers, who rescued the heavily unionized automaker, now own around
26.5
percent of the company.
Yet
back in June of 2009, President
Barack Obama claimed taxpayers were only “reluctant shareholders” after
the
government took its stake in General Motors. “What we are not doing —
what I
have no interest in doing — is running G.M.”
He
went on:
“They,
and not the government, will
call the shots and make the decisions about how to turn this company
around.
The federal government will refrain from exercising its rights as a
shareholder
in all but the most fundamental corporate decisions.”
If
General Motors believes it needs
to extricate itself from government to be successful, why would
reluctant
shareholders stand in the way?
GM
executives reportedly feel the
company is tainted by the stigma of bailouts. It has also reportedly
struggles
to institute pay caps imposed by Washington during the bailout, as they
undermine the company’s ability to recruit top candidates. Pay caps
might be
wonderful for populist messaging, but they make no sense in the real
world.
Moreover, this entire situation is another example of why government
shouldn’t
own companies: Even when it’s not involved, it is.
So
why won’t the Treasury
Department sell the remaining shares? Well … November.
If
the Treasury sold its stake, it
would have to admit, despite all its big talk of success , that the
venture
cost taxpayers a bunch of money.
As
I write GM’s shares stand at
around $24. If the U.S. sold it shares today it would lose another $15
billion
on the bailout. GM stock would need to reach $53 a share for the U.S.
to break
even. The Wall Street Journal reported that the Treasury Department
will start
thinking about unloading shares when it hits the $30s. Well, G.M.’s
52-week
high is $27.68 and its value has been halved in the past two years.
And
for those who believe that the
Treasury Department is really waiting for a more favorable stock price;
you’re
probably going to be waiting a long time. With demand in Europe and
China
weakening, Moody’s Investors Service recently lowered its growth
forecast for
global auto sales next year.
Moreover,
the Treasury Department
itself estimates that government will lose more than $25 billion — 15
percent
higher than its previous forecast. So why wouldn’t it move now?
Source:
humanevents.com
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