A Weight Hobbling G.M.
http://www.nytimes.com/2012/05/04/business/gm-profit-falls-but-surpasses-forecasts.html?pagewanted=allBecause the
Treasury Department still owns a 26 percent stake in the company, G.M. remains saddled with pay restrictions that limit its ability to recruit new talent, a ban on corporate jets, and lingering image problems in the eyes of some consumers.
Company executives usually deflect questions about the effect of government ownership on their business, or their frustration with it. But in a rare interview on the topic, G.M.’s chief executive, Daniel F. Akerson, said he longs for the day that G.M. can finally say goodbye to its biggest shareholder.
“I try not to let it bother me,” Mr. Akerson said. “But the fact is it does bother me.”
The farewell celebration won’t be happening anytime soon. Based on G.M.’s current stock price of $22.37,
taxpayers would lose an estimated $15 billion if the government’s shares were sold today. Unless the stock rose quite significantly, the chances are slim that the Obama administration would sell its
500 million shares before the November election and invite criticism from Republicans about the wisdom of the auto industry bailout.
Mr. Akerson said he has regular conversations with Treasury officials, but has never gotten guidance on when they intend to divest. “I don’t know what the government’s plan is,” he said. “I think it would be helpful if they would publicly state it.”
After pumping in nearly $50 billion to save G.M., American taxpayers owned about 60 percent of the company when it emerged from Chapter 11 in the summer of 2009.
The government sold the bulk of its holdings at $33 a share in the company’s public stock offering a year later.But the administration is not eager to sell the rest at a loss. “As with all of our investments, we try to balance the goals of maximizing taxpayer recoveries and exiting as soon as practicable,” said Timothy G. Massad, the assistant Treasury secretary overseeing the Troubled Asset Relief Program. “We don’t have a specific timetable, but we’ll continue to watch the market closely.”
Like partners in a three-legged foot race, both the company and the government are hobbled by their connection. Unless G.M. improves its performance and gets the stock price up, the government can’t sell without losing billions. At the same time, uncertainty about the government’s stake worries some investors and hurts consumer perceptions of G.M. cars.
In a survey last quarter of 30,000 Americans shopping for new vehicles, 32 percent of those who rejected a G.M. model said they would not consider buying from the carmaker because of the bailout.
While that is down from 59 percent in 2009, “G.M. still has quite a hangover,” said Art Spinella, president of the firm that conducted the survey, CNW Marketing Research of Bandon, Ore. “That’s a significant number of people who will buy something else because of the bailout.”
Chrysler, the other Detroit automaker to receive government aid, fared better in the most recent survey. The company paid off its federal loans last year, and just 22 percent of shoppers said they had avoided a Chrysler product because of the bailout.
Mr. Akerson said the negative feelings about G.M. were an unfortunate byproduct of the past struggles that led the company to seek government assistance.
“All we can do is put numbers on the board and hope people start to believe in our story,” he said.
Government ownership is also affecting G.M. internally. Mr. Akerson said the company has lost a half-dozen candidates for management jobs because of
salary restrictions on companies getting TARP financing. G.M.’s search for a new head of human resources lasted months because several promising contenders balked at the uncertain time frame for the government’s exit.
The government’s ban on corporate aircraft is mostly a matter of inconvenience for Mr. Akerson and his senior staff members. He was stuck in a Paris airport for five hours last year after missing a connecting flight to China, and often spends an entire day traveling to remote factories for visits that last two or three hours.
“It is part of the deal,” Mr. Akerson said. “There’s no use complaining about it.”
He was more troubled by how G.M. had become, in his words, “a political football.” He still seethes about being called to testify before Congress in January about the safety of the Chevrolet Volt, which experienced battery fires after government crash tests. “I think the whole thing was politically driven,” he said.
Mr. Akerson also said he believed that politics were affecting the government’s decision to hang on to its G.M. stock. President Obama has been pointing to the turnaround at G.M. as a bright spot in the nation’s economy. But if Washington were to sell G.M. shares at a loss, the comeback story would be eclipsed by the cost to taxpayers for its rescue, he said.
“That’s why
I don’t think they are going to sell in an election year,” Mr. Akerson said. “Right now, this is a positive for the current administration. If they sell it this year and don’t get all the money back, it’s not a positive.”
