Speaking to a congressionally-appointed panel in Detroit, car czar Ron Bloom said that the U.S. government does not want to run the operations of General Motors, and reiterated his belief that we will sell our stake in General Motors as soon as possible.
Meanwhile, CEO Fritz Henderson said that he plans to repay the government's loan within six years and would like to take the company public again in 2010. However, given that more than 80% of the original loan to GM has been converted into equity, repaying the loan is really not an impressive accomplishment -- and even that might not even be possible.
"The companies' long-term viability and ability to repay the taxpayer dollars they were receiving would be seriously undermined if the government became involved in day-to-day business decisions," Bloom said when addressing a congressionally appointed panel in Detroit.
I don't think that we'll able to sell our stake in GM soon, even if there is an IPO in 2010, and here's why: Doing so will force the U.S. government to admit that it lost billions of dollars in taxpayer money as part of a bailout that many in Washington and Detroit were insisting wouldn't end up costing taxpayers anything.
Selling the stake in GM will make an urealized loss a realized loss. Last month, DailyFinance's Peter Cohan ran the numbers and showed why it will be virtually impossible for the government not to take a significant loss. Will the Obama administration be able to explain it away politically and sell the stake, or will it have to hold on to preserve the illusion of a possible good outcome for taxpayers?
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