Dec 092013

gmThe federal government sold its remaining shares in General Motors today. The whole affair cost U.S. taxpayers $10,500,000,000. I’m pretty sure we were assured this would be a profitable venture, but hey, who’s counting lies at this point?

The sale is a good thing, of course. In a constitutional republic, the government has no business owning car companies, partially or otherwise.

It also means I can consider GM’s products again. Now I’m not in the market for a car at the moment. The Technical Writing Express only has 72K miles on it. But I play the game all the time because I like cars. If I were shopping right now, I might like to lease a Cadillac ATS. I’d definitely drive one.

Now our esteemed president was fond of saying that Mitt Romney “would have let Detroit go bankrupt.” He left it at that, because that makes it sound like Romney would have let the car companies cease to exist. That is not at all what would have happened. Existing, by-the-book, bankruptcy law would have preserved GM and ultimately left it healthier.

But see, the government “managed” the bankruptcy. (“Managed” is code for “placated the unions in ways they wouldn’t have been otherwise.”) “Managing” the bankruptcy has made it more likely that GM will get in trouble again.

(And, while Chrysler continues to exist, it’s a subsidiary of an Italian company now. Is that what we wanted?)

Welcome back, GM. Wishing you the best and hoping it works out. Be smart.

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 Posted by at 8:52 pm

  4 Responses to “Government Motors no more”

  1. Your math is way off. You assume that the original pricetag was a complete write-off. It wasn’t. As you later describe – the shares were SOLD. That implies a value in return. So we must take the purchase price MINUS the sale price to get the actual profit/loss. Bear with me here because it’s going to get complicated – The amount the government sold those shares for exceeded (that means more than) the amount of the bailout. This means that there wasn’t real money lost – except as adjusted for inflation and that’s a calculation you are not prepared to attempt as yet. Imagine the fun when we get into opportunity costing, macro-stimulus calculation, and economic valuation. It’s a fun road ahead.

    • Great, but that’s not apples to apples, Rick. Of course it’s trivially easy to make an inductive case for financial benefit from what happened. After all, GM remained open. Duh.

      The rest of my post is the germane part. There need not have been any direct use of taxpayer funds. Obama wanted to “manage” the bankruptcy to protect union interests. GM could have filed bankruptcy under existing law and continued to operate without the executive branch lifting a finger. That’s the difference.

      Ten and a half billion of them, actually.

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