Plans for Auto Stock Unclear

The Senate has voted not to accept a plan to give U.S. taxpayers stock certificates equal to their share of the government’s stake in General Motors Co. and Chrysler Group LLC.

Republican Senator Lamar Alexander from Tennessee proposed the plan which would also have prevented the distribution of additional Troubled Asset Relief (TARP) funds to the automakers, who both weathered bankruptcy and restructuring recently.

Alexander’s plan was added to a bill funding the Energy Department and water projects.

Regarding the taxpayer payback, Sen. Alexander said, “Give the stock the government owns in General Motors and Chrysler to the 120 million Americans who paid taxes on April 15. If they paid for it, they should own it.”

Opponents of the plan, such as Senator Dick Durbin (D-Ill) claimed that it would lessen the control the government has over the companies. “Is this really the best outcome to make sure that this company and its workers and its retiree rights survive?” Durbin said.

The Obama administration is adamant about its desire to sell the government’s stake in GM and Chrysler as soon as possible. Ron Bloom, chairman of the Treasury and “Car Czar,” said that an initial public offering for GM stock is a possibility for next year.

U.S. government ownership of General Motors is currently at 61% and it holds an 8% share in Chrysler. Together, the two automakers have received about $65 billion dollars from the federal government in the past year.

Plans for the government stock cash-out are sketchy. No dates have been set, and no terms outlined such as financial or operational benchmarks the companies must reach before a stock sale would be possible.

GM CEO, Fritz Henderson, said that his company will repay federal loans within six years. Since more than 80% of the original loan was converted to equity, repaying the debt should be easier but skeptics say that, even so, complete repayment might not be a possibility.

Some financial experts contend that recouping all the funds is impossible, and that the U.S. government is bound to take a substantial loss on the deal.

Peter Cohan of Daily Finance ran the numbers in his recent article, “Can We Get a Return on Our $50 Billion GM Investment?” According to Cohan, it just doesn’t add up.

Cohan’s assessment is at odds with the positive spin from congress and automakers who asserted that, in the end, the bailout would not cost taxpayers anything. In fact, some optimistic proponents of the measures still contend that taxpayers could realize a profit over time.

Posted in In the News

Search for a vehicle

About Us  |    Contact Us  |    Terms of Use  |    Privacy Policy  |    Auto Dealer Marketing  |    Site Map

©2018,, LLC All rights reserved.