Skip to comments.General Motors Makes Obama an Offer He Canít Accept
Posted on 09/18/2012 3:21:08 PM PDT by jazusamo
Here we go again. Déjà vu all over again as General Motors spreads rumors that they are tired of being Government Motors and they are so cash rich that they offered to buy Treasury's taxpayer-funded stake in the company. In typical deceptive GM fashion, sources were not named and spokesman Jim Cain refused to confirm the rumors. This is not the first time GM played the rumor game, as I previously wrote about over a year ago.
Supposedly, GM wants to buy back about $5 billion of shares from Treasury, but Treasury just won't sell. No kidding. As if GM honestly believes the Obama Administration would sell shares at a loss to taxpayers before election time. But honest and GM are two words that, when used together, seem to be oxymoronic since the company became known as Government Motors. Are we to believe that there were good faith meetings between GM and Treasury regarding a GM buyback of shares? Is the puppet media that gullible that no one will expose the obvious attempted deception that GM thinks there is a chance that Obama will sell taxpayers' GM stake two months before election time?
So, we have a twisted Detroit version of the Godfather story with GM supposedly making Obama an offer they know he will refuse. Perhaps the President will wake up in bed with a depleted Chevy Volt, volatile, lithium-ion based battery in his bed instead of a horse head. Much scarier!
Let's look at a few facts to determine how honest GM is regarding the buyback offer rumor. About a year and a half ago, GM issued $2 billion of new stock to reduce under-funded UAW pension obligations . If they are so cash rich, why didn't they use cash instead of diluting shareholders? Pension obligations are now about $24 billion under-funded. How does GM plan to get these funded if they use their cash for a share repurchase? In addition, pension assets are not expected to earn the suspiciously high 11% rate of return they did in 2011, making it likely that the under-funded obligations will grow rather than decline without further contributions. GM will have to go further in debt (which they claimed they wouldn't do) or issue more stock and further dilute shareholder value to fund UAW obligations.
GM says it doesn't like being associated with the government, yet its actions speak otherwise. They continue to spend tens of millions of dollars advertising the Chevy Volt, a car that is the poster child for Obama's failing green energy initiatives. On top of that, they proclaim the car to be gay . No politics there. It is debatable whether the car loses $49,000 per vehicle or just a few thousand dollars per vehicle for GM shareholders.
I also reported last year that GM has other politically-motivated investments like a $3 million solar-powered plant in Michigan to build Volts. GM shareholders are expected to be reassured by the fact that the plant will pay for itself...in 200 years. And let's not forget GM CEO Dan Akerson's recommendation to have $5 a gallon gas to help America's green needs, despite the fact that $5 a gallon gas would lose money for GM shareholders.
I have heard past deceptions from GM, like the Chevy Volt supply could not keep up with demand and taxpayers were repaid in full as touted by then CEO Ed Whitacre. Evidence arose that the government had input to the false claims that taxpayers were repaid in full, and Obama-appointed Akerson changed his story about the reason for low Volt sales. It is now the fault of Republicans who criticize the vehicle. I do not doubt that the current rumor spreading about GM offering to buy back Treasury shares is another deception.
Almost a year and a half ago, Treasury could have sold taxpayers' GM stake for about $30 a share. They wouldn't. Shares are now down about 20% from then, resulting in an additional loss in value of about $3 billion for taxpayers. Yet the Obama Administration acts in as deceptive a manner as GM as they imply taxpayers have a sure bet to regain the losses if they stick it out and wait to sell, as if the possibility that GM shares might decline does not exist. This as Team Obama campaigns on the perceived success at GM as they falsely imply that the company never even went bankrupt. Not only did GM go bankrupt, but the Obama Administration made sure the process was as rigged as a Democratic Convention floor vote as UAW claims took precedent over non-union claims.
Wall Street insider Tim Geithner knows you do not base your decisions to sell stock on what you paid for them. Yet Treasury will continue to gamble taxpayer money on GM and continue to stay invested (and GM surely knows it) as they market-time their exit. Unfortunately for America, the gains they seek by the gamble are political rather than monetary.
Mark Modica is an NLPC Associate Fellow.
VIDEO: Treasury Rejects Sale of GM Stake
Submitted by NLPC Staff on Tue, 09/18/2012 - 17:00
NLPC Associate Fellow Mark Modica was interviewed last night on Fox Business Network's Willis Report. Here's a transcript:
Cheryl Casone : Government Motors. Trying to shed its ties to Uncle Sam once and for all, pushing the sale of the U.S. stake in the company altogether. But saying goodbye is hard to do. The government's digging in its heals, saying taxpayers would have faced a massive multibillion dollar loss. Joining me now with more is Mark Modica, associate fellow for the National Legal and Policy Center. This was a bad deal. I mean this was a bad deal for the taxpayers. Of course, Treasury said no to it.
Mark Modica : Hi, Cheryl, well, they have been saying no. Actually, they could have first sold the stake almost a year and a half ago when share price was over thirty, and we heard the same story. They're not going to sell at a loss. The fact is, they should get out of the auto industry. They should have done it as soon as possible. The decision to hold on, is based on politics. Look, Tim Geithner worked on Wall Street. He knows that a decision to sell stocks shouldn't be based on what you paid for the stock. It should be based on whether you should own the stock at this time. And right now, the government shouldn't own General Motors stock. They should sell as soon as possible, should've sold almost a year and a half ago when the value was up about twenty percent higher than it is now. Taxpayers have seen a loss of about three billion dollars more since that time, and we heard the same story then. They didn't want to sell it at loss. Stocks can go up. They can go down. Get us out now.
Cheryl Casone : But Mark, I mean Treasury Secretary Geithner also knows that if you hang in sometimes the markets going to ebb and flow. Right now we've actually got an upswing for the market. So, if the taxpayer can and they can hold on, I mean that is the truth here. We're talking about the government. It's not, you know...
Mark Modica : Well, sure.
Cheryl Casone : ...we are not trading on the back of individuals, the U.S. government, they've got trillions of dollars, why not hang around for another year and let the investment grow a little bit?
Mark Modica : Yeah, it is called market timing. Do you want? Should we have taxpayer money being market-timed in the market? You know, these are the same guys that went -- there were suggestions to put Social Security assets in the market, they said no way, we shouldn't risk taxpayer money. Well, why are they market timing their exit from GM? With this philosophy, you can sell GM and buy Apple and gamble some more with taxpayer money. The fact is, this is a political decision. General Motors knows this. General Motors knows that the government is not going to sell their stake. This is all politics, public relations. They are not going to sell before the elections. They should sell. They should have sold before, and we will be lucky if we don't lose more money on it when the smoke clears.
Cheryl Casone : OK Mark, you know, obviously, Fox Business reached out to the Treasury to get their comments on this report. And here is what they told us, they say that the government shouldn't be, shouldn't be a long term investor, but we have to maximize taxpayer returns. And they say we didn't do this to make a profit, we did it to prevent a collapse of the auto industry. Treasury assistant secretary Tim Massad to Fox Business. So, that is their take on this. That we are not looking to make a profit or any kind of timing we just want the auto industry just to stay stable.
Mark Modica : Well, what they did it for was to save the UAW and protect cronies and politically powerful UAW. That is a fact. But once again, markets go up, they go down. To say that we are going to protect taxpayer investment and make an assumption that the stock has nowhere to go up is just arrogant. The stock can go down as well as up. And taxpayers should be out. The government shouldn't be in this business. Sell it now.
Cheryl Casone : All right, Mark Modica, you have major point, thank you very much, Mark. Good to have you on this show.
Mark Modica : Thank you.
Ohhhhhhhhh......I see.......it’s the old BUY HIGH SELL LOW STRATEGY.....makes as much sense as our foreign policy.
GM claims Obama’s Volt is gay, ...well yeah! Obama wouldn’t have it any other way.
LOL! You’re right but that really threw me, I had to click the link. :)
Where is the class-action lawsuit of the dealerships that were dissolved and 'redistributed' to Soetoro cronies?
What? No one has standing against the Regime?
Indiana State pension funds who held Chrysler bonds tried the lawsuit approach and lost. This was done by (then State Treasurer, now Senate candidate) Richard Mourdock:
GM tried its green version of their “Mark of Excellence” logo but maybe now they ought to make it pink.
Oddly enough, in a slip opinion dated December 14, 2009, the Supreme Court ended up vacating the Bankruptcy Court ruling, giving the bondholders a legal victory, but no money.
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