Look for GM to suck up more bailout heroin
GM stock offering wrapped up in politics
As desperately as General Motors Co. wants to shed its "Government
Motors" rap and quash any appearance of political meddling from official
channels, the walk up to an initial public offering of the new GM looks
like anything but.
In his first visit to Detroit since his administration pushed GM through
bankruptcy and infused it with taxpayer dollars, President Barack Obama
a couple of weeks ago touts GM's revival as a job well done -- even as
poll numbers for him and his party continue to sink.
Less than three weeks later, GM files for its long-awaited IPO and
experts duly report that the Securities and Exchange Commission
typically takes 30 to 60 days to green-light an IPO which, natch, would
reach deep into October. As in, a bare few weeks before the mid-term
Second, no matter how desperately management might want it and political
calculations might demand it, the mounting evidence -- a slowing
economy, slumping consumer confidence, jittery stock markets, just two
profitable quarters, management turmoil and even a warning from the
president's former auto czar, Steven Rattner -- suggest this fall might
be precisely the wrong time to begin to unwind a massive government
stake in GM.
Thursday, the Dow Jones Industrial Average tanked 144 points to 10,271
after first-time jobless claims jumped higher than expected,
manufacturing showed signs of slowing and the Conference Board's index
of leading indicators pointed to slower growth for the balance of the
year. IPOs in the auto space -- Tesla Motors, for one -- are trading
closer to their offering prices than their 52-week highs.
Auto sales keep tracking in the mid-11 million-unit range, suggesting
the kind of anemic consumer demand that spooks investors. Dealers report
slowing showroom traffic despite some positive signs from big-box
retailers. Home sales are weak, housing starts are slow, property values
are slipping again and talk of a double-dip recession continues,
But GM's IPO, essentially approved or not by the Treasury Department, is
moving ahead anyway. Trouble is, the less enthusiastic would-be
investors are about GM and the less willing they are to buy shares, the
less the feds can legitimately crow about paying back the taxpayers'
billions if they make less money on the deal.
Third, offering large chunks of a controlling stake in the nation's
(still) largest automaker may be politically attractive for Team Obama
and management battling the "Government Motors" stigma. But what if a
not insignificant number of those shares fall into the hands of foreign
investors acting for governments seeking the credibility (and
technology) that could come with a sizable share of a restructured and
Russian investors fronting for the Kremlin last year worked with a
Canadian partner to make an unsuccessful bid for GM's Opel unit, based
in Germany. Chinese players, backed by the government, have the capital,
the acumen, the economic heft and a proven ambition (see the new owners
of Volvo Cars).
That the Russians pushed by Prime Minister Vladimir Putin threatened to
take a massive stake of GM a few years back, only to be brushed by a
presidential fastball from the Bush White House (according to a source
with direct knowledge of the events), tells you what's possible and why
the Obama administration might want to make sure it doesn't happen.
Meaning mid-term electioneering and the polling fortunes of the Obama
White House are the tip of the very large political iceberg shaping the
future of a new GM -- the Detroit automaker so easily dissed but so
coveted (under the right conditions) by some of the world's most
In short, selling shares in GM to investors in the United States and
Canada, as this week's S-1 registration statement says, is more than a
potentially whopping market event. It's also more than whether GM's
winnowed product portfolio and global business plan are credible and
realistic, or whether the revived company can hit aggressive sales and
profit targets, or whether "Detroit is back."
GM is in the unenviable position of being a geo-political football, as
much a delicious potential target for acquisitive foreign players as it
is a pawn for national politicians -- the president, Democrats and
Republicans -- seeking vindication and some kind of tactical electoral
Inevitable costs of politicians coming to the rescue of business
leaders? Of course. Which doesn't mean the Obama administration -- or
any other one, for that matter, irrespective of party -- didn't make the
only basic choice it could when it agreed to fund the bailouts of GM and
Chrysler Group LLC under strict restructuring requirements.
They've succeeded, so far. But taking the next big steps will have
political repercussions, no matter how strenuously both sides deny it.
That says everything you need to know.
Service Guarantees Citizenship