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GM stuck as political football until November election

April 19, 2012
Howes: GM stuck as political football until November election
By DANIEL HOWES
If a cornerstone of President Barack Obama’s re-election campaign is the success of the auto bailouts, how come his Treasury Department is sitting on any plan to unload its remaining 26-percent stake in General Motors Co. and declare victory?

That’s what the GM guys working to take the “government” out of “Government Motors” would like to know — privately, of course.

As much as the feds’ $49.5 billion bailout undeniably breathed new life into a collapsing GM in early 2009, there’s growing frustration inside the automaker over Team Obama’s political decision to defer until after the November election any move to sell some or all of the government’s minority stake.

The dawdling, ranking executives say, contributes to the burden weighing on GM shares despite posting $7.6 billion in net income for 2011, despite rising auto sales for GM and the U.S. market in general, and despite a balance sheet relatively free of punishing debt.

GM shares, which debuted at $33 a share in their initial public offering in November 2010, closed Wednesday at $24.15 — less than half the $53 per share needed for taxpayers to break even on the government’s investment. Also weighing on GM shares are money-losing operations in Europe, the uncertain outlook there and a slowing market in China.

But it’s the political vortex back home, namely Team Obama’s search for whatever economic accomplishments it can find to tout in the critically important battlegrounds of Michigan and Ohio, that is complicating the new GM’s path back to respectability and unambiguous independence.

The president and his people hail the Chevrolet Volt extended-range electric car as an environmental messiah on wheels, yet CEO Dan Akerson uses the platform of a congressional hearing into testing-induced battery fires in three Volts to decry the “political football” that GM’s Volt has become.

Vice President Joe Biden and his people want to use a GM plant as the backdrop to a campaign event, but the company says no because direct — and visible — association with an increasingly unpopular White House and reminders of the emotionally charged bailouts are not particularly helpful to selling cars and trucks.

Team Obama’s proxies cite the bailouts and the subsequently strong financial performance of GM and Italian-controlled Chrysler Group LLC as proof of the president’s economic chops. Their enthusiasm, however, conveniently ignores that the government’s indefinite indecision on its stake in GM doesn’t help the automaker because it underscores the notion the government wants to control GM and undermines the confidence of investors suspicious of government meddling in business decisions.

And losing money on the investment would help? Not if the political goal is to buttress the president’s electoral fortunes in battleground states by downplaying any reminders that the feds almost certainly will lose taxpayer money (currently estimated to be $21.7 billion overall) on its auto bailouts.

But charting an exit strategy for the government’s stake in GM might diminish losses now standing at $14 billion for the Detroit automaker, according to the Treasury Department’s most recent monthly report to Congress, because the market reaction is likely to be positive.

Help GM vs. help Obama? Not much of a choice in the cynical calculus of presidential politics, where the incumbent reserves the right to invoke the bailouts and the subsequent success of management decisions and execution as if they were his alone. Right.

Polite refusal to detail a “what’s next” for the government’s GM stake enables the president and his surrogates to claim success for the bailout and to postpone until later any evidence of actual financial losses on the investment. It also allows them to use the company’s success as a rhetorical club against Mitt Romney, the presumptive Republican nominee who has repeatedly criticized the administration’s handling of the auto bailouts.

At this point, as the president swings through town for yet another series of appearances seeking support and campaign contributions, lightening the load weighing on GM’s stock price is somewhere between low and nonexistent on the priority list — even if more certainty for GM promises to mitigate prospective taxpayer losses.

Political football? Get used to it, GM, because the perverse impact of recent success means the company’s people, products and prospects are likely to be a battleground all their own between now and Election Day.

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