In a recent interview with the Detroit News, former “Car Czar” Steve Rattner praised General Motors Company chairman and CEO Ed Whitacre but said the automaker “slightly elasticized the reality of things” when it claimed to have paid its government loans off “in full.”
Last month, GM made loan payments to the U.S. Treasury and Export Development Canada totaling $5.8 billion and immediately launched a new commercial touting the accomplishment. The commercial, which featured the automaker’s de facto pitchman, CEO Whitacre, drew criticism from many including Senator Charles Grassley (R-IA) who accused GM of “a TARP money shuffle.”
The Competitive Enterprise Institute (CEI), a Washington-based advocacy group, later filed a complaint with the Federal Trade Commission accusing GM of false advertising. The institute’s senior attorney Hans Bader said that the ad, which the company has since stopped airing, was “completely misleading.” Although he conceded the ad may have gone too far in its claims, Rattner could hardly have been more complimentary of Whitacre and the work he has done since taking the reins at GM. “We should all wake up and thank God we have him. The guy’s a hero,” Rattner said.
GM has admitted that it used government funds to repay its loans. In a recent interview, GM vice chairman Stephen Girsky was asked to comment on the claims being made by Senator Grassley and others. Although he admitted their claims were “in effect true,” he added, “year ago nobody thought we’d be able to pay this back.”
The CEI says the formal complaint they filed with the FTC is more than simply splitting hairs over the exact accounting methods used in the loan payments. It contends GM is misleading American consumers — who are now the company’s largest stakeholders — by giving them a false sense of confidence in its financial health. Claims that are “likely to mislead consumers” are prohibited by the Federal Trade Commission.
The institute’s general counsel, Sam Kazman, said, “If I applied for a car loan using GM’s financially misleading approach, I’d be tossed out of the dealership on my ear.” The lawsuit brought by the CEI has drawn criticism from the CATO Institute the grounds that it attempts to infringe on the first amendment right to free speech. CATO Institute senior fellow in constitutional studies Walter Olson said, “Despite its current dependence on government, GM is in every relevant legal sense a private company, so any precedents forged against it will wind up applying to every other private enterprise that might wish to advertise on matters of public controversy.”
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