Who would have thought in the fall of 2008 that two years later, General Motors would be literally on the floor of stock market like a shiny new automobile on a showroom floor, revving its engines for investors?
Not us.
The company that became known as Government Motors after a $50 billion government bailout began paying back taxpayers on Thursday when GM shares returned to the stock market.
We opposed the massive bailout of the automobile industry as far back as October 2008, before Barack Obama had even been elected president, as throwing good money after bad. The U.S. auto industry had endured its darkest decade and was being severely hampered by legacy costs — unsustainable pension and health care promises made to employees who were retiring in their 50s — just as foreign nameplates, such as Toyota, were gaining more market share.
While it’s too early to call the bailout a complete success, it is working.That is, if your definition of working is a functioning company that continues to employ tens of thousands of employees while selling cars.
We originally had hoped GM would rally on its own, if necessary, through bankruptcy protection. But the so-called pre-packaged bankruptcy the Obama administration shepherded the company through left taxpayers on the hook for $50 billion.
It also put the U.S. government’s ownership stake in GM at 60 percent. It wasn’t a bankruptcy filing in the traditional sense, where a court helps a distressed company reorganize and work out new contracts with its creditors. Instead, it was the nationalization of private industry, in which private creditors were bullied into accepting pennies on the dollar for the bonds they had extended to GM.
Yet on Thursday, President Obama stood before the media to declare it a success and claim that more than 1 million jobs in all 50 states would have been lost had the government not intervened. “Supporting the American auto industry required tough decisions and shared sacrifices,” he said. “But it helped save jobs, rescue an industry at the heart of America’s manufacturing sector, and make it more competitive for the future.”
Thursday’s initial public offering cut in half the federal government’s investment in the company. The federal government initially invested $43 billion in GM stock through TARP and then extended another $7 billion loan, which GM already has repaid, according to Reuters.
Thursday’s stock sale allowed the Treasury to reduce its stake in GM from 61 percent to 37 percent, according to Bloomberg News. For taxpayers to be completely paid back, it was reported that the remaining shares will need to gain 65 percent, to about $54.40 per share — a tall order.
Century-old GM once symbolized all that was best about our nation’s industrial might. Even though we opposed the bailout, it was a proud moment to see the company again standing tall as the Wall Street bell rang out and GM went public again.
