What’s Good for GM Is Good For the Country

The title of this post was taken from testimony given by Charles Wilson, Eisenhower’s nominee to be the Secretary of Defense who was the president of GM at the time of his nomination.  When asked during his confirmation hearings if he thought he could make decisions that were adverse to GM, he replied with the title.  And, with GM’s initial public offering this week, it still rings true.

General Motors, long a mainstay of the Dow Jones Industrial Average, was delisted from global stock exchanges in 2009 in connection with its bankruptcy proceedings and restructuring turnaround.  Investors were wiped out in during the course of proceedings and shares haven’t been traded since the process began.  This coming Thursday, GM is set to launch an initial public offering on the New York Stock Exchange, with shares expected to price at around $26-29 a share.  Interest in the offering has been high, with some analysts predicting that share prices will rise significantly from their starting point, making those involved with the transaction a lot of money.

That means you, not that it’ll pop up in your checking account though.  The United States initially government began intervening in the company when President Bush (not President Obama, as many mistakenly believe) authorized $13.4 billion in emergency financing from TARP funds to be extended to GM and Chrysler, with an additional $4 billion line of credit, in the event that it was needed.  In the spring of 2009, the President aggressively pushed for a government underwritten, expedited bankruptcy process, whereby the Treasury would finance the company in return for a majority stake in the restructured, smaller company.  The offering will significantly reduce the stake the government holds in GM, and the Treasury will look at shedding the rest of its shares in the coming year, netting the government an actual PROFIT from helping save the troubled automaker.  GM is also ahead of schedule in paying back the loans to the government.

Had the government not intervened in saving GM from collapse, it would have sent shockwaves through the global economy, with states like Michigan, Ohio, Indiana, Wisconsin and Illinois bearing the brunt of it.  In these states that are already reeling from years of economic decline, especially in Michigan, the economic situation there would have looked like a wasteland  had GM went under.  Hundreds of thousands of jobs would have been lost, be they with GM, its suppliers, vendors, dealers and many other firms that do business with GM.

Luckily, that didn’t happen.  GM has revamped itself.  The products are better, the sales are higher, and the company is making money again for the first time in a few years.  Perhaps most surprisingly, when you hear about a recall, chances are that it’s for a Japanese model, something that we’re not used to hearing.  The President took a huge political risk in saving a company when it wasn’t clear that it could be.  As a result, the government will have come out with a profit, the company has grown, an American icon has been saved and, most importantly, millions of Americans have held onto their jobs.  If I were the President, I’d insist on ringing the opening bell of the New York Stock Exchange along with the GM CEO this coming Thursday.  This was his policy, and it was a stunning success.

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