Friday, April 23, 2010

Still Government Motors: Don't Let GM Fool You

Over the past few days, GM CEO Ed Whitacre has made quite a splash with his pronouncements that GM has paid back the entire $6.7 billion loan it received from the U.S. and Canadian government. When I first saw his op-ed in the Wall Street Journal, as well as the advertisements GM placed in major papers, I was a bit puzzled. I knew that GM had taken much more than $6.7 billion in aid. How could Whitacre be claiming that GM had paid the government back, with only this $6.7 billion remittance?

In today's Wall Street Journal, Paul Ingrassia explains. As he points out, the overwhelming majority of federal assistance DID NOT come in the form of loans. Instead, it came in the form of an equity investment. That equity stake equates to more than $50 billion of taxpayer dollars.

I think Whitacre and GM should have been much clearer in their joyous pronouncements. As Ingrassia writes, "Mr. Whitacre should have acknowledged that directly. He would have enhanced the company's credibility compared with the old GM, which seemed to declare victory every other week even in the face of disaster." I think Ingrassia is correct, and frankly, he's being kind in his assessment of GM's actions this week. The company should have been FAR more straightforward with the American public. GM is still Government Motors until we see a public offering, or some other transaction, which enables the taxpayers to extricate themselves FULLY from this company. It has hardly paid the taxpayers back in full.

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