Courtesy of Dr. Paul Price, Beating Buffett
Amid all the hoopla about GM’s IPO last week was a feeling that somehow the bailout had ‘worked out well’ for taxpayers. Barron’s was nice enough to publish the truth about where we stand so far.
GM common shares need to rise by another 54% just to get even for citizens. The sad reality is that U.S. citizens posted a $4.5 billion loss on the shares already sold and that doesn’t include any of the President Bush era bailout money which is long gone and never to be recovered. It also doesn’t take into account the billions poured in GMAC (now renamed Ally Bank).
It’s my guess that any move to $53 on the shares may take years to come in a best case and may never happen in reality. Once GM starts showing consistent profits the UAW will go right back to crippling the company.
Those trumpeting the ‘success’ of the bailout also ignore the foregone future tax payments that came with letting the post-bankruptcy GM keep the billions in tax-loss carry forwards that normally would not be available to them. Ford, which avoided taking public funds, has to pay taxes on future earnings while GM will not be paying one cent in corporate taxes for years to come, if not decades.
This reported ‘triumph’ is really a loser on all counts thus far.
Dr. Paul Price
