BUSINESS
IS GM REALLY GOING TO GO BANKRUPT AGAIN?
Louis Woodhill at Forbes seems to think so:
President Obama is proud of his bailout of General Motors. That’s good, because, if he wins a second term, he is probably going to have to bail GM out again. The company is once again losing market share, and it seems unable to develop products that are truly competitive in the U.S. market.
He’s right about the president being awfully proud of “rescuing” GM. Remember this from last week?
And on Monday when GM’s stock fell 0.3 percent to $20.47 a share, TheBlaze noted the following:
Considering that the feds still hold 500 million shares of GM stock, they’d have to find a way to offload them for about $53 apiece to recover the $49.5 billion spent in bailing out the troubled automaker. But if the stock continues to stay where it is, this means that the feds will end up posting a loss of more than $16 billion on bailing out GM.
Because of this dive in stock price, the Treasury Department was forced to revise its projected bailout losses upwards to $25.1 billion from $21.7 billion — an increase of 15 percent.
“It’s doubtful that the Obama administration would attempt to sell off the government’s massive position in GM while the stock price is falling. It would be too embarrassing politically. Accordingly, if GM shares continue to decline, it is likely that Obama would ride the stock down to zero,” Woodhill writes.
“GM is unlikely to hit the wall before the election, but, given current trends, the company could easily do so again before the end of a second Obama term,” he adds.
He provides some additional perspective:
In the 1960s, GM averaged a 48.3% share of the U.S. car and truck market. For the first 7 months of 2012, their market share was 18.0%, down from 20.0% for the same period in 2011. With a loss of market share comes a loss of relative cost-competitiveness. There is only so much market share that GM can lose before it would no longer have the resources to attempt to recover.
So, is this what being “rescued” looks like?
Final Thought: Hot Air’s Erica Johnson reminds us of the following quote:
If General Motors, Ford and Chrysler get the bailout that their chief executives asked for on Tuesday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.[…]Without that bailout, Detroit will need to drastically restructure itself. With it, the automakerswill stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check. …The American auto industry is vital to our national interest as an employer and as a hub for manufacturing. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs. It would permit the companies to shed excess labor, pension and real estate costs.
You know who said that? Republican presidential candidate Mitt Romney said that. If Woodill is proven correct and GM continues its steady decline in value, how much do you think this will affect the Romney and Obama campaigns?
Follow Becket Adams (@BecketAdams) on Twitter
Front page photo source: The Associated Press
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