Wednesday, December 19, 2012

Does GM Lose Car Sales Because of the Bailout?

Joseph White of the Wall Street Journal reports today that the Obama administration and General Motors have announced plans for the firm to buy 200 million of the Treasury’s GM shares at $27.50 a piece.   That move will begin the process of unwinding the government's stake in the firm.  White explains that the move to eliminate the "Government Motors" stigma from the company may be quite beneficial:

Once the last government share is sold, GM also can get to work unloading the pejorative “Government Motors” image that has weighed on the company in the U.S. market. It’s not clear how many potential GM customers have turned to Ford Motor Co. or other rivals out of distaste for the federal bailout. But they’re out there.

Call me skeptical, but I wonder how much removing the "Government Motors" label will really help GM sell more cars.  Are customers unhappy with the government bailout, particularly given that taxpayers will not come close to breaking even on their "investment" in the firm?   Sure, the bailout has many opponents.  Does that mean the company was losing significant sales as a result of the bailout?  I'm not so sure.  As White acknowledges, no one really knows how many customers have turned to rival car companies as a result of distaste for the bailout?  One could argue that the firm hasn't delivered the kind of attractive, high quality vehicles that it needs to produce in order to generate stronger revenue growth.   At the end of the day, the bailout may have improved the balance sheet and cost structure.  However, GM will only survive and thrive if it makes products that customers want.  I don't see a ton of evidence that the firm has become significantly better at doing that since the bailout.   

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