The big payback
GM says it wants to start paying taxpayers back,|but I smell a rat
By Jennifer Hadley 11/25/2009
Fear not, taxpayers! There’s a bit of good news to be found in the otherwise cringe-worthy report that the interest alone that we’re going to be paying on our nation’s astronomical debt will amount to more than $4.8 trillion. This good news comes from none other than General Motors, which has announced that it will begin paying back some of the money that we lent them well ahead of schedule. Frankly, I think this is a terrible idea. Now, before you send me hate mail telling me how stupid I am for making such a seemingly counterintuitive claim, hear me out.
First, let’s go ahead and state the obvious, which is that certainly none of us are actually going to see a dime of this payback. I’ll bet my left arm that not one of us will receive a check from the now privately owned company enclosed in a lovely thank-you note that reads, “You are the best! Thanks so much! XOXO, Fritz Henderson.”
Aside from the fact that GM’s plan to begin paying back $6.7 billion in taxpayer dollars with a $1 billion check in December won’t have any positive impact on my financial well-being; there are other reasons I think this is a bad idea. At root, they all boil down to the idea that, although I appreciate their eager-beaver efforts to pay back what we gave them, I smell a rat.
Although Cash for Clunkers spurred sales for GM, the company recently revealed that it had lost $1.2 billion between July (when it came out of bankruptcy) and the end of the third quarter September 30. Indeed, although the company isn’t losing as much as some had predicted, that’s still a massive loss. Wouldn’t it make sense to wait until they are turning profits, like Ford? Why the rush to pay us back?
I’m no conspiracy theorist, but the fact that GM went from being a public company to a private company, with the Treasury being its largest shareholder, raises some red flags. The $50 billion in equity that the Treasury (read: taxpayers) owns will eventually go up for sale publicly again, possibly by the latter half of 2010. But in order for people to buy stocks, they have to believe that eventually the stock will go up in value and they’ll sell later and cash in, right? (I know that’s a pretty technical assessment of how the stock market works, so I hope you’re still following.) But the truth is, nobody is going to buy a stock that they don’t think has potential value.
Call me crazy, but wouldn’t a company’s ability to pay off its debts seem to say “Hey, we’re ahead of schedule. We don’t have to pay this back for another five years, but we’re on top of things. We’re confident in our future.” From where I’m standing, that seems to be a great way to create the illusion of potential value —value that just might appeal to investors.
Say I’m wrong, though. Say GM sales skyrocket and the company goes public once again and everything is just fantastic. Are we ever getting the $50 billion back? Not likely, according to the General Accounting Office, which recently announced it has serious doubts that taxpayers will ever recoup the total amount of our loan.
So I just have to ask: Why the urgency, GM? I know you’re an “American Icon” and all, but even with that working in your favor, I seriously doubt we’re going to bail you out a second time. So don’t blow it. Keep the money for now and just use it to build some cars people may actually want to buy. We’re not getting that money back anyway, but don’t add insult to injury by treating us like we’re stupid. I’m not buying your story and I certainly hope for your sake you’re not hanging your hopes of future success on the reintroduction of the Buick Regal. Because I’m not buying that, either.
Contact Jennifer Hadley at email@example.com.