GM ad glosses over the reality
Big Ed appears to have stepped into a big muddy.
In a TV ad that is generating the kind of publicity you don't want, GM
CEO Ed Whitacre strides across the screen saying the federally
controlled automaker paid back its "loan, in full, with interest, years
ahead of schedule." What he doesn't tell viewers is that a) the
repayment of $4.7 billion came from taxpayer funds advanced to GM and b)
that the feds still hold 61 percent of GM -- valued at something like
He's technically correct because he clearly uses the word "loan."
Otherwise vague? Yes. Misleading? Depends on your perspective and
whether you may have seen the headline on a Wall Street Journal op-ed
above Whitacre's name: "The GM Bailout: Paid Back in Full."
Not even close, underscoring a problem that is likely to keep on giving
for as long as the feds hold any stake at all in the automaker they
rescued by running it through bankruptcy and then funding it with public
"We are concerned that GM, under your leadership, has come dangerously
close to committing fraud, and that you might have colluded with the
United States Treasury to deceive the American public," Rep. Darrell
Issa, R-Calif., wrote Whitacre on Thursday. "If someone relies on your
statements in the future ... your false statements may expose GM to
millions of dollars in damages, further reducing the value of the
The statements also may do nothing of the sort.
Put aside the convenient fact that Issa, ranking member of the Committee
on Oversight and Government Reform, represents GM rival Toyota Motor
Sales U.S.A. in Congress. Or that Sen. Charles Grassley, R-Iowa, accused
GM of a "money shuffle" that "is not a repayment" in a letter to
Treasury Secretary Tim Geithner.
Accept the obvious fact that government handling of GM -- will the
Securities and Exchange Commission hold GM to the same standard as
others or will the Federal Trade Commission investigate the ad claims?
-- is a convenient club Republicans and anyone else opposed to bailouts
will readily wield against the Obama administration and other Democrats
as mid-term elections draw nearer.
Because it all comes down to this: GM's credibility. Saying you've paid
back a loan, but omitting the fact that you did it with taxpayer money
and that the feds still hold a controlling stake in your business,
probably isn't the wisest way to win friends, woo new customers or
"We do have to walk a fine line," a ranking GM executive familiar with
the planning behind the TV spots told me. "You're right: In the ad, we
did not say we repaid the loans but we still owe $40 billion." Then he
added: "We didn't say anything false."
In fact, GM didn't say anything that hadn't been known for months --
namely, that the automaker would be paying back the remaining balance on
its $6.7 billion direct loan by the end of June. It also has been known
that the preferred route for selling the government's stake in GM is an
initial public offering of shares to investors.
But as an old editor used to say, readers don't keep clips. Neither do
taxpayers, many of whom understandably might not have the gumption (or
the patience) to do anything more than take Whitacre's ad copy at face
value. Which is the point.
There are others. The ad -- which was thoroughly lawyered for the
automaker -- signals two things about the new GM: first, that its
communications strategy in the early going is to accentuate the
positive, downplay the negative details and, if necessary, apologize
Second, Whitacre is willing to put his own hide behind the
take-some-risks mantra he keeps preaching inside the company. The ads,
coming before first-quarter numbers are due to be released in mid-May,
signal a readiness to risk riling politicians or tweaking competitors.
Whether that's gutsy or dumb will depend on how difficult competitors
and politicians choose to make things for GM, especially if Whitacre &
Co. give them more material.
Bottom line: American taxpayers still own 61 percent of GM, worth about
$43 billion. When -- if -- that all ever gets paid back, you'll know
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