“The General Motors success story”
President Obama is campaigning on how he saved General Motors from bankruptcy. There are a few inconvenient truths to that story. One is that the government still owns 500 million shares of GM stock that they received for bailing out GM with $50 billion in taxpayer dollars. To break even, the stock must be sold for $53, but GM stock has dropped to around $20 a share. So the taxpayers are out billions of dollars on the GM bailout. The government also loaned GM $50 Billion; of which GM still owns the taxpayers $25 billion.
Another inconvenient truth is that much of GM’s sales are from selling vehicles to the government. GM reported a 16 percent increase in sales for June, but government purchases of GM automobiles were up 78 percent and accounted for half of those sales. So basically, the government is bailing out GM again with huge purchases of vehicles (with taxpayer money).
GM has also increased its inventory of full-size pickups to a 135-day supply which is a large increase over the accepted norm of a 60 day supply. But GM records as revenue when vehicles go to dealers, which inflates their sales figures by counting unsold inventory as sales.
So the true story of GM is that the US government owns 25 percent of General Motors and is subsidizing GM with large purchases of vehicles using taxpayer’s money who are already out $40 billion on unpaid loans and underwater stock. We are not hearing much about the Volt electric car this campaign season. Reuters reports that General Motors is still losing as much as $49,000 on each Volt it builds.
The scary thing is that President Obama in campaign speeches says that he wants to repeat his GM success story in other industries. As a taxpayer, I believe we already have about as much “success” as we can stand.
Printed in the September 13 edition.