The Corner

GM’s IPO

Regarding the triumphalism attending GM’s IPO, let this post serve as a friendly reminder that GM still owes the U.S. government $43 billion; that its financing arm still owes $14.6 billion; and that its sick friend Chrysler still owes $8.2 billion. Before we start declaring GM an American success story, let’s keep in mind that the government lost $9 billion of taxpayers’ original investment on today’s partial stock sale. GM still has major problems stemming from its pension obligations. Yes, auto sales have rebounded, but that is thanks to a surge in light-truck sales, which are not the kind of clean, green machines that Obama wants GM’s customers to buy. And yes, China bought a 1 percent stake, but analysts are calling this “a diplomatic arrangement” made for the purposes of smoothing rocky U.S.-China relations. 

Let’s also keep in mind that many conservatives did not object to the idea of government-backed debtor-in-possession financing for GM and Chrysler at the height of the credit crisis, arguing that bankruptcy was unavoidable but that it might be necessary for the government to play a limited role in keeping the lights on at GM. The counterargument at the time, which one encountered constantly when arguing with bailout proponents, was that GM could not survive a bankruptcy — even a government-financed one — because the damage to its brand would be too great. Like many of the scare stories the automakers were telling at the time, this turned out to be false. It eventually became necessary for both GM and Chrysler to declare bankruptcy, and this did not prove fatal to either company. However, instead of providing simple debtor-in-possession financing, the TARP-financed bailout of the auto companies gave the Obama administration more control over the process, which it used to allow its union supporters to jump the line ahead of senior creditors. That’s exactly the kind of thing conservatives feared, and why we called for the government to have a much more circumscribed role if it was to have any role at all.   

Look, no one is rooting for GM to fail, or for thousands of autoworkers to be laid off, or for the taxpayers to lose their entire stake in the company. But it is just ridiculous to start popping champagne corks left and right over the fact that an industrial problem child like GM managed to put its pants on today without falling on its face. Let’s hope the company continues to see sustained profitability and that the losses to taxpayers from the auto bailouts end up being small. But the defenders of those bailouts who are now calling them a “success” haven’t even come close to proving their case. We know that at least one of the automakers’ scare stories — the one about nobody buying cars from a bankrupt auto company — turned out to be wildly overblown, and it is highly likely that the rest were, too. The country might very well have been better off following conservatives’ advice and letting the courts deal with GM and Chrysler. Taxpayers certainly would be.

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