Government Motors moving to become Half-Government Motors
Goverment Motors, formerly General Motors, is reportedly planning the second-biggest IPO in history, looking to raise up to $16 billion by selling about one fifth of the government’s stake, bringing total government ownership under 50%, according to a Thursday news story by Bloomberg.
We’ll have to do a little math once the deal is priced to guess whether it’s a good buy or a better sale, looking at GM’s total current debt as well as the likelihood of GM’s success with their Chevy Volt electric car (so far seeming rather unimpressive, overpriced at $41,000, and uncompetitive with either other electric cars or with much cheaper conventional gasoline cars.)
The price will also give some clue as to how much money the government, meaning the taxpayers, will lose (or perhaps make, though I’d be a little surprised) on the bailout of GM. And to be sure, even if the government ends up with a profit, the move was still wrong.
My guess it that GM stock will be eagerly bought up by the public…and that it will be a good (short) sale fairly early on despite the company actually turning a $1.33 billion profit in the second quarter.
That said, perhaps some of the people who flocked to Ford and foreign automakers because of refusal to buy from a government-owned company might reconsider and look at GM vehicles when they need a new car or truck. I wouldn’t consider it until the government owns zero shares, and even then I probably wouldn’t simply because of how the GM bondholders were raped by the Obama Administration in order to simply give those investors’ interests to the United Auto Workers.
I don’t wish for GM to fail, but I do wish for the UAW to fail on everything except maintaining most of the benefits that its retirees are counting on…in part because the taxpayer will get swamped with that bill if they fail and in part because even as a heartless capitalist I don’t want to see guys who worked a lifetime based on a promise of a decent retirement end up in soup lines and homeless shelters simply because their union bosses and idiot corporate managers failed them.
With a volatile stock market, it will be a most interesting time for GM to launch the second-biggest IPO in US history (the biggest being credit card company Visa). I think an IPO will be well-received at first, both by investors and by those like me who want the government to get out of owning stock in private companies, or rather to return these companies to being private. However, until the union grip on the company, and even more importantly the Obama Administration grip, is loosened even further, it’s hard to think GM will be a great stock in the long run.
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