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.