A reading of David von Drehle’s Time article on Government Motors—er, General Motors—suggests that the new GM may never make money. In which case it’s hard to see how the government can sell its majority share. The lead story in the Washington Post this morning, begins, “The United States would recover most of its planned $50 billion investment in General Motors within five years, according to a preliminary Treasury Department estimate that foresees the company, now on the brink of bankruptcy, rebounding over that time to become a strapping global competitor.”
But as you get into the story, you get the idea that this is a very rosy scenario. “’I don’t know how much we’re going to recover,’ acknowledged an administration official who spoke on condition of anonymity. ‘I’m not here to tout stock. But we’re very excited about this as a company.’” And on the jump page: “Brian Bethune, chief U.S. financial economist for IHS Global Insight, called the assumptions ‘extremely optimistic’ given the risks in the economy and the challenges facing the company.” And: “’We hope to recover as many taxpayer dollars as we can,’ the administration official said. ‘It would be wonderful to recover more.’”
General Motors has been a sinkhole for private capital over the years. Sample quote dredged up from the Internet: “Ask almost anyone who the worst managed company was over the last 20 years, and they will tell you ‘General Motors.’ Over the years GM has destroyed $52 billion more than the $188 billion it has invested.” The company is worth exactly zero to anyone in the private marketplace and can’t even attract debtor in place financing in bankruptcy. Does any serious person believe there is a serious chance that the Treasury Department’s estimate will prove accurate? “Taxpayers are not going to get their money back,” declares Lawrence Kudlow flatly. “Yes, we the people will be left holding the bag for the mistakes of GM’s management and labor leaders over the last four decades.” That sounds far more likely to me.
