COMMENTARY Cart-Before-Horse Alert: Gov Plans Quick Sell of GM, Chrysler Stakes
July 28, 2009
With a combined $65 billion invested in the turnarounds of General Motors Co. and the
Chrysler Group LLC, the federal government Monday expressed an optimism for those companies' future that would have made their own executives blush: Ron Bloom, new chief of the Presidential Task Force On Autos, said the feds want to recoup the taxpayer dough as soon as possible after GM's planned initial public offering next year.
An IPO? That can generate billions? Next year?
GM is less than a month emerged from its Chapter 11, and Chrysler not yet 90 days free of receivership. The legitimate monetary claims of probably thousands of parties were conveniently and almost joyously doused in the companies' Section 363 "quick rinse" bankruptcy maneuvers.
And this "new" GM -- the company hacking off gangrenous limbs in the hope of saving a body that's been smelling bad since the 1970s -- now presses with talk of an IPO as if it's the latest devastatingly hip tech startup instead of the failed (and supposedly humbled) rust-belt icon that incinerated some $70 billion in just the two years BEFORE the government stepped in?
These government-corporate executives (it's hard to tell which is which these days) and their tales of untold IPO riches waiting to be reaped seemingly are still living in the go-go '90s instead of a time in which the two sputtering automakers unfurl far-from-guaranteed restructurings in a defiled economy and the country's worst auto-sales market in 40 years.
Presumably to quell consistent grumbling about "Government Motors" interventionism, Bloom said in a Detroit oversight hearing to account for the billions of the Treasury's auto-industry investment via the Troubled Assets Relief Program that the government would like to start selling its shares in GM and Chrysler as early as next year.
Just one question: by the end of this year, GM alone will have burned a tenth of a trillion dollars just to stay alive. The company's restructuring is happening in real-time lockstep with an auto market that's battering even the most stable companies. Amidst all this, the Treasury and GM figure investors will show enough interest in an IPO to churn up the billions needed to get right with the taxpayers?
Sounds more like a tale desperate gamblers spin for a shylock than the realistic plan of people whose priority is supposed to be paying back the public.
Wall Street's proven it's not quite as sharp as we had been led to believe, but if there is a GM IPO next year and a line forms for it, nobody on either side of the deal has learned much from their self-made strife. -- By Bill Visnic
Cart Before the Horse Image Courtesy Carnegie Museums
Ron Bloom photo courtesy United Steelworkers
Posted by Michelle Krebs at 5:14 AM under Chrysler , Commentary , Featured , GM | Comments (2) | digg this | Seed Newsvine
I still don't see how it's fair to split a company into "good" and "bad" parts (effectively forgiving a lot of its debts). Imagine an individual under the same circumstances: hundreds of thousands in credit card debt, a low-paying salary, gambling debt, two mortgages, student loans, and alimony. You're telling me that it's ok to move all that to a "bad" individual which will then be liquidated, then give a huge loan to the leftover "good" individual? How is that fair to their creditors, those who are contractually obligated to receive some sort of compensation?
I can understand investors receiving nothing. Sorry guys, you bet on the wrong company. But if Company A provided GM with a product, and now they can't get paid for it, or will receive much less than fair market value, how does that help anything?
Posted by: greenpony | July 28, 2009 at 10:20 AM
This guy is an idiot. The government isnt going to be able to sell its entire share next year, they merely said they want to START next year. Henderson has already said it will take YEARS for the goverrnment to divest its stake. Anyone with a shred of common sesne would have to believe the auto market (and thus GM) will be healthier in 3 or 5 years then they will be in 2010. The government has already said they cant try to sell a huge chunk next year because that would discourage investors. People will invest in GM if the market is recovering. All car companies are bad investments when US sales are less than 10M a year. If things start picking up you can bet that GM and Ford will look like solid bets. GM has said from the beginning that an IPO was 6-18 months away. its not like they are claiming they can jump right into the market and attract billions within weeks as Visnic is saying. We all know he has a vendetta against Detroit but it would be better if he stuck to the facts. I cannot believe Krebs allows this nonsense to be posted on a "news" blog.
Posted by: 1487 | July 28, 2009 at 12:47 PM