Why Do Mid-Term Elections Impact GM’s IPO?

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There are a lot of strong opinions about the auto industry bailout, pro and con. Like a lot of complicated issues, arguments from both sides have merit. However, it’s not as if the decision to bailout GM and Chrysler is recent. We all know it happened, we all have our opinions, and that ought to be the end of it.

But it’s not.

GM, it seems, is delaying their IPO until after the Nov. 2nd mid-term elections. What in the world do elections have to do with GM’s IPO?

Politics Shouldn’t Dictate GM’s Business

GM’s bailout definitely had political ramifications, but I’m one of these idealistic people who believes bailing out GM and Chrysler was the best option available. While I’m a believer in free-market capitalism, as an observer of the auto industry I recognize allowing GM or Chrysler to go under would have crippled the US auto industry. GM, and to a lesser degree Chrysler, use many of the same suppliers that companies like Ford, Toyota, Nissan, and Honda use.

If GM had gone under, it’s likely that dozens of major suppliers would have collapsed as well. The¬†domino¬†effect of suppliers going out of business could have killed a re-surging Ford, not to mention putting a lot of autoworkers, dealership employees, etc. out of work. The bailout prevented this from happening, and love it or hate it, this decision might have even helped to prevent a deeper recession (maybe – only the historians will know for sure).

In any case, the bailout is done, right? GM has paid back their $6.7 billion loan, and perhaps someday in the future stock sales are going to return the rest of the $50 billion the US government provided to prevent GM’s collapse.

Yet GM isn’t allowed to start selling stock until after the mid-term election. This decision has been made by officials at the Treasury department, and I suspect it’s because they don’t want to confront the following fact until after the elections are over:

GM’s bailout isn’t a money-maker for taxpayers.

Is that a surprise to any thinking American? Why, then, are politicians dictating GM’s financial policy?

Anyone?

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  1. Whether or not GM should have been bailed out by US… can be debated.

    1) GM and the government have been spouting this nonsense about GM “paying back government loans”. Let’s deal with facts. GM got about $50 BILLION from the government. $6.7 billion or so was considered a “loan”. The government and GM decided to take more money from TARP and use that to repay the $6.7 billion “loan”. So, they borrowed money to repay money. The reality is they have paid back almost nothing.

    2) The USA owns about 61% of GM, Canada owns about 12% and the UAW – yes UAW – owns about 18%. The stockholders of the initial IPO are expected to LOSE money… plus ALL of the accounting must be made public for an IPO. As a result, it doesn’t take a genius to figure out why the current “owners” want to wait until AFTER the election for this stuff to come out.

    Bottom-line – more dishonest politics and politically expedient lies are being spread from this White House for their benefit – who is looking out for US?

  2. Joe says:

    Stephen – I appreciate your interest in this issue and your numbers indicate you have done some research on the subject.

    Let me answer your question for you.

    Know one is looking out for you, nor should they be. The sooner we let go of that sentiment the better off we will all be.

    You have one option. Use it at the polls.

  3. Jason says:

    Stephen – Thanks for your comments – the article didn’t go into enough detail about where the money came from. Thank you for that.

    My point – and I think it’s very much the same as yours – is that the timing of the IPO shouldn’t be screwed with by the White House. If this is about business and getting our money back, than someone a lot smarter than me who understands IPOs should set the timing and that should be it.

    I’m not anti- or pro- Obama, but this, in my mind, stinks. I hope that this little maneuver doesn’t reduce the final IPO price.

    Joe – Cynical, but I happen to agree. I hope that everyone in America votes in about 2 months, and then I hope we all take responsibility for our choice whenever the people we helped elect do something ridiculous…but that’s probably never going to happen.

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