David Harsanyi: The auto bailout failure is now completeDAVID HARSANYI
December 25. 2012 8:30PM
You may recall that during the presidential election, the Treasury Department refused requests by General Motors to unload the government's stake in the giant automaker.
Taxpayers had sunk $50 billion into a union bailout in 2009 and were now proud owners of 26.5 percent of the struggling company. Reportedly, GM had growing concerns that the stigma of "Government Motors" was hurting sales in the United States. At the time, any transaction would have come at a steep loss to taxpayers and undermined the President's questionable campaign assertions that the auto union rescue had been a huge success.
Well, now that the election is over and the Treasury Department is freed of political considerations, it plans to sell its 500 million shares of stock over the next 12 to 15 months and ease its way out of the company. GM will buy around 200 million shares at $27.50 per share by the end of the year. GM's buy brings taxpayers back to around $5.5 billion of the $27 billion the company still owes. The special inspector general for TARP estimated in October that the Treasury would need to sell the remaining 500 million shares at $53.98 per share just to break even on its investment.
Once GM buys its 200 million shares, the taxpayer stake in the company will drop to 19 percent, but the price to break even on the remaining 300 million shares will be around $70 per - or, in other words, probably never. As of this writing, GM shares are trading at around $27 per share. That, in the Obama era, is considered a successful transaction between the state and private industry. So successful that you'll also remember that during the campaign, Obama maintained that "what we did with the auto industry, we can do in manufacturing across America."
Taxpayer funds and unions for everyone.
Even if taxpayers recouped all of their money from the bailout, there are a slew of economic arguments against rescuing failing industries. But the more immediate problem is that we will never get our money back, anyway.
GM's labor costs, estimated at $56 an hour, still are higher than any of its competitors. Since the Obama administration cajoled the normal bankruptcy hearings and eradicated the pensions of nonunion workers to ensure union success, employees, like the ones at Delphi, the auto parts manufacturer and one-time GM subsidiary, took it on the chin while $26 billion of taxpayer funds were used to keep United Auto Workers in a secure position.
The Treasury Department has just revised its estimate upward to $25 billion in losses, and it will probably be more than that when it's all said and done. Taxpayers also suffered a $2.9 billion loss in Chrysler (the carmaker had received $12.5 billion through TARP programs) in 2011.
"This announcement is an important step in bringing closure to the successful auto industry rescue, it further removes the perception of government ownership of GM among customers, and it demonstrates confidence in GM's progress and our future," claimed GM Chairman and Chief Executive Dan Akerson in a press release. But really, the bailout exemplifies much of what's wrong with government. The cronyism. Wasted taxpayer money. The government's propensity to interfere with the marketplace and prop up losing propositions.
With news of the government getting out of the car business, we'll probably see a spike in the stock price. Maybe once Obama has completely dropped our "investment" it'll take off. But a success for taxpayers? Hardly.
David Harsanyi is a columnist and senior reporter at Human Events. Follow him on Twitter @davidharsanyi.