Thread: GM turns the corner

GM turns the corner

The bailouts of Chrysler and General Motors have had no shortage of critics, this page among them. We were against the idea in the waning days of the Bush administration, saying that automakers should instead use bankruptcy to shed debt, cut costs and rework labor contracts. When President Obama linked government help to bankruptcy restructuring, we saw some hope but were still skeptical.

With GM filing paperwork Wednesday to return to its status as a publicly traded company, it's time to ask whether some crow needs to be eaten, at least as it concerns GM. The answer is: possibly.

It's far too early to declare the GM bailout an unqualified success. But it is certainly going a lot better than critics thought likely. News of the initial public offering of stock follows a lightning fast exit from reorganization, two profitable quarters, the repayment of a $7 billion loan and rising consumer satisfaction scores. GM, in fact, could now be in better shape than the economy as a whole, which is saying a lot considering that two years ago it could have been mistaken for roadkill. It certainly is a leaner, healthier company, thanks to the forced restructuring, and the devastated Detroit economy is looking better.

So was the bailout worth it? We might soon know, or at least be able to make a reasonable judgment. The stock offering will tell what markets think GM is worth. That, in turn, will provide an indication as to whether taxpayers will have made money, lost money, or broken even by putting up $43 billion for a 61% stake in the company at a time when credit was hard to get and consumers were balking at big-ticket purchases.

Beyond the actual costs, of course, are the intangible costs associated with bailouts. They may signal future CEOs that they, too, could get government help if they make bad decisions or fail to address problems.

Against these costs are the obvious benefits. Had GM and Chrysler been liquidated, the impact would have been a massive hit to an economy already in free-fall. At this point, GM has a strong interest in shedding the "Government Motors" moniker, and the U.S. government has a strong interest in selling its shares judiciously to maximize the return to taxpayers.

It's possible, though not likely, that the full investment will be recovered. If the balance sheet nears even, a judgment of the bailout will rest on weighing intangible costs against very tangible benefits. In that context, the bailout would look like a good call after all.

http://www.usatoday.com/news/opinion/ed ... _ST1_N.htm

How much is GMAC finance in the red 57 Billion dollars. How much does G.M still owe the Federal goverment? Billions