The Daily Caller Spells Out What the Obama Administration is Hiding About General Motors

Obama celebrated the General Motors success story after the bailouts last week. It's all smoke and mirrors. General Motors still owes American taxpayers $58 billion, and chances are they aren't ever paying it back. As well, General Motors continues to produce sub-par cars that don't live up to their expectations. The Chevy Volt, which was promised to get 230 mpg gallon but actually gets only 35, is the perfect example of this. To make up for its failure, the government is giving a $7,500 tax credit for anybody who purchases this GM failure.

Iain Murray of the Daily Caller spells out why something stinks with Obama and General Motors:

When a government sells stock in a company, it is usually trying to maximize short-term revenue. Therefore, the share price is normally pegged at what the market will bear. If the valuation of the total stock offering is less than the value of the company (or a portion thereof) being sold, something is amiss. That is certainly the case with the initial public offering of GM stock sold to investors on November 17. The stock price is telling us something the federal government doesn’t want to admit, all the rhetoric about the supposed success of the GM bailout notwithstanding...

If the federal government wanted to recoup its investment in GM, then the GM stock price should be much higher than the $33 initial price. In order to break even, as the Deal Journal reports, the stock price would have to rise to around $50 per share. So why is the Treasury Department selling off the company at a loss?

First, the government is what is known as a “motivated seller.” By offering such a low stock price, the administration is essentially admitting that it has no place in running an auto company. While GM’s financial position is much better than it was when it should have gone bankrupt, the company’s finances are not great. A quick crunch of any of the numbers in the GM prospectus shows the company is not the healthy organization the politicos would have you believe. They have done a poor job running the company, even if they did save it from going under by ignoring the law and throwing billions of dollars at it. The sale prospectus even admits “our (that is, the government’s) disclosure controls and procedures and our internal control over financial reporting are currently not effective.” Hardly a ringing endorsement!

Second, they’re not the only ones in the game. The unusual bankruptcy settlement for GM granted a significant portion of the company to the United Auto Workers. The union is in this game too, even though it has no investment to recoup. The UAW is selling around 18 million shares, so it stands to gain about $500 million for its pension fund — at taxpayers’ expense.

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