Obama and his campaign have gone all-in in running on what they have spun as the successful turnaround of General Motors (GM), which received nearly $50 billion in taxpayer bailout money.
The Obama campaign wants to use GM to prove not only Obama’s managerial skills and instincts but to contrast Obama with Romney, whose past successes in the private sector give him a considerable advantage over Obama when it comes to economic issues.
Since Romney did not support the GM bailout, Obama’s team is betting on GM to neutralize the advantage Romney has over Obama on the economy.
For this reason, Obama’s “Betting on America” campaign theme is a not-so-subtle reference to GM.
But as executive turmoil within GM again bubbled to the surface this week, the Obama administration’s record on GM should be examined more closely.
And on examination, they have continually over-promising and under-delivering since the company relaunched in November of 2010 after receiving billions in taxpayer dollars.
And because of the way GM has been mismanaged, there has been constant turmoil and turnover within the top ranks of the company since it went public.
But Obama’s administration and GM’s CEO Dan Ackerson have largely been absolved by the press of any blame they deserve.
Since GM declared bankruptcy in 2009 and was bailed out by the Obama administration, Obama and GM executives have publicly set business benchmarks — such as market share — they have failed to reach while publicly pumping up GM’s stock and prospects.
When GM’s stock debuted on November 18, 2010 at $33 a share, Obama said the “tough decisions” that led to the bailout were beginning to pay off, according to a CNN report.
“American taxpayers are now in a position to recover more than my administration invested in GM,” Obama said at a press conference then.
Steven Rattner, who headed the Presidential Task Force on the Auto Industry that managed the bailout, pumped up GM in January of 2011, saying, “recent progress at GM gives reason for optimism that it may be possible for taxpayers to get every penny back,” according to Investor’s Business Daily (IBD).
In June of 2011, Rattner, whose financial misdeeds prompted authorities to seek to ban him from trading securities for life, continued praising GM’s prospects.
“As a pure investment matter, if I were managing this piece of capital, I would hang on at the moment,” Rattner said. “I’ve got my fingers crossed the market will generally improve and GM with it and the government will be able to get out and it’ll be a good outcome for everybody.”
GM’s turnaround plan assumed, as its starting point, a market share of at least 19 percent.
“The public plan is 19 percent and change. That is what everything is being based on,” GM board member Stephen Girsky said during a panel discussion at a conference at Columbia Business School in October of 2009.
In January of 2010, former GM CEO Ed Whitacre promised taxpayers would make a profit on the $50 billion bailout. These comments were consistent with Obama’s.
“I think the government’s investment is well placed and I think they’ll make a lot of money,” Whitacre told reporters after an event at the annual auto show here Monday morning. “It won’t be too long.”
But after all the rosy talk and rhetoric, GM had to deal with hard numbers.
In August of 2011, GM’s original IPO price had declined by 20%. Dan Akerson said then that GM’s board told him that they did not want a “transitional CEO.”
“I know what I’m signing up for. As long as I make my numbers, I’ll probably keep the job,” Akerson said. “If I don’t, then I shouldn’t keep the job. That’s the way it works.”
Akerson continued his rosy forecasts when he said that in a few years, “I think people will go, ‘Wow, I’m glad we invested in GM.’ I’m talking about the American taxpayer,” Akerson said, according to USA Today.
In January 2012, GM’s market share declined to 18.4 percent, and this time Akerson changed gears and said this had been his plan all along, which contradicts what had been said by GM board members in 2009.
“I like profitability more than I do market share. We’re a mass producer and scale matters to us, but obviously we’ll look for margin and profitability going into 2012,” Akerson said, according to Reuters.
Even in the US market that now provides the lion’s share of its profit, GM is losing ground to its competition. According to GM’s most recent earnings report, North American market share has also fallen for the last three quarters, now standing at 16.4%.
When GM’s stock price continued to decline, Ackerson, in June of 2012, could not change gears anymore and had to apologize for GM’s tanking stock price.
“I regret the stock has not done well post-IPO. I assure you we’re all dedicated to improving that over the medium to long term,” Akerson said.
Just two months earlier, Akerson had said he hoped GM would return to investment-grade within the year.
“There are things that will happen over the next year or so that will drive that decision,” Akerson said in an interview at Bloomberg headquarters in May.
When asked if GM would get an investment rating in 12 months during the same interview, Akerson replied, “I hope so, but I don’t know.”
And in the meantime, GM’s market share has been eroding. In fact, GM’s overall market share to date in 2012 is 18.1%, according to the Wall Street Journal.
The Treasury still owns roughly 30% of GM, and since GM’s shares are worth less than 2/3 of their original value, it is going to be extremely difficult for taxpayers to recover what they put in — against their will, in many cases — to GM.
Even worse, the way GM has been managed reflects poorly on the Obama administration and raises questions about his ability to manage — let alone turnaround — America’s economy.
When former GM CEO Whitacre abruptly resigned, Akerson, who got on GM’s board because of his connection to those in the Treasury Department, abruptly — and surprisingly — became the company’s CEO.
Commenting on GM for CNBC in August of 2010, Phil LeBeau wrote that “there are few answers coming from GM, and even fewer coming from the Treasury department which appointed Dan Akerson to the GM board last year and as the majority shareholder has to know what’s going on.” LeBeau asked questions in August of 2010 that seem even more relevant today and in light of the distressing news coming out of GM:
If Ed Whitacre told the board earlier this year that he was not going to stick around, why did the GM board wait until now to make a quick selection of Akerson as CEO? Shouldn’t the board have moved sooner? Wouldn’t that have made Wall Street more comfortable heading into a GM IPO? Instead, for the second time in the last nine months a GM CEO is suddenly stepping down.
LeBeau also observed two years ago, in something that could have written this week, that it had been “common to hear people blast the old GM board of directors as being short-sighted, poorly run, and an example of how a board of directors should NOT function,” but the current board may be even worse.
Concerning Akerson’s sudden appointment, LeBeau noted that there was not a public search for a new CEO, Whitacre’s resignation and Akerson’s selection caught other GM executives by surprise, and the process looked “like a rush job akin to a high school student council picking its next president.”
“In short, many people, including investors, are wondering how decisions are being made at GM and whether this company is so intent on getting an IPO done that it’s dropped the ball when it comes to corporate governance,” LeBeau asserted.
And yet, GM still remains a central part of Obama’s campaign strategy.
When Romney visited a GM plant in June for a campaign event, Obama rapid response director Lis Smith said, “Romney’s decision to hold an event today at a GM supplier in Ohio highlights how, if he’d had his way, the American auto industry and the more than a million jobs it supports would cease to exist today.”
“GM and Chrysler are in existence, creating jobs, and posting some of their most profitable quarters in history because President Obama bet on American workers,” Smith boasted. “The real question is whether Mitt Romney — at his economy-focused event today — will explain to Ohioans why he opposed saving an industry that is responsible for one out of eight jobs in their state.”
And, as TPM notes, Obama has referenced GM many times on the stump.
“Together, we’re fighting our way back,” Obama has said. “When some wanted to let Detroit go bankrupt, we made a bet on American workers, on the ingenuity of American companies. And today, our auto industry is back on top of the world.”
But GM seems to hardly be on “top of the world.”
As Breitbart News editor Ben Shapiro noted, “Obama may have bailed out GM, but he didn’t bail out the taxpayer – and in the long run, GM won’t be a viable business just because the government cut it a check.”
GM’s decline suggests the debate going forward should not be about how successfully Obama turned GM around — he didn’t — but about why GM’s CEO Akerson and Obama and those in his administration have not been called out and held to account for their mismanagement of taxpayer money that was forcibly invested in what seems like a company more than on its way to more decline.
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