As of the start of this week, General Motors stock was trading at just under $23 a share. That is one reason why you, the taxpayer, may still own a large share of the auto maker when elections roll around next fall.
The government, which bailed out GM to the tune of $49.5 billion, needs the price to be about $53 a share in order to get your money back. The Obama administration reportedly would settle for $30, which would be a loss to taxpayers of more than $10 billion.
A lot is being made this week about GM once again being on track to become the world's leading auto seller. It is true that the company has rebounded nicely from the brink of disaster in 2008. That has come with a cost, however, and the strength of that rebound must be measured against the new realities of the age. The global car market is much smaller than it once was. Europe is a greatly weakened market. Even in the United States, people are not as car-crazy as they recently were. A Citigroup study found that U.S. consumers are getting rid of more vehicles than they are buying. A lot of households are finding they can do without a car for every driver in the family.
Auto sales in the United States averaged about 17 million prior to the recession. The forecast is for 13.9 million in 2012. GM sold about 9 million cars and trucks in 2011, which was several hundreds thousand more than its German and Japanese competitors.
Yes, the government bailout succeeded in keeping GM afloat. No one will know whether the auto industry would have benefitted from the type of creative destruction that would have resulted if the government hadn't stepped in. Nor will it know whether the company could have made itself leaner and better able to compete in the long-run. Former Car Czar Steve Rattner said recently he regrets not pushing auto workers, management and creditors to made deeper concessions.
No active UAW workers underwent a pay cut or was forced to forfeit any pension benefits. Creditors ended up with more than they would have gotten in a liquidation, Rattner said.
And yet the government did manage to save both GM and Chrysler, which was put under the management of Fiat SpA. Whether those companies compete long-term now has much to do with how well they can nimbly adapt to changing markets, particularly when global economies improve. The turnaround has been more tepid than the administration would like to present, which is evident given the price per share.