Government Motors' Folly: By the Numbers

News coverage of Government Motors over the past few weeks has painted an increasingly glowing picture, but here’s a dose of reality: GM still has not repaid taxpayers for the bailout and it’s looking less and less like taxpayers will ever be made whole.

Unlike much of the media, we actually spent a considerable amount of time looking behind the press releases to see what GM’s numbers really say about the health of a company taxpayers now own.

This week, we will be sharing with readers a more realistic picture of the company’s health. The bottom line: The picture is far less rosy than GM would like you to believe.

1. GM’s Share Price: Will taxpayers ever be made whole?

Remember these promises?

• “Recent progress at GM gives reason for optimism that it may be possible for taxpayers to get every penny back.” – Steve Rattner, Presidential Task Force on the Auto Industry (11/18/2010)
• “American taxpayers are now positioned to recover more than my administration invested in GM.” – President Barack Obama (11/18/2010)
• “The government’s investment is well placed, and I think they’ll make a lot of money.” – Former GM CEO Ed Whitacre (11/18/2010)

GM’s share price closed below its $33 IPO price for the first time on March 1st. The company has underperformed the S&P 500 by 15% since the beginning of the year. The Middle East is in turmoil and gas prices are skyrocketing. Not a good harbinger for GM’s share price.

Now the Feds say that they want to get out of their GM position as soon as possible. Their first opportunity to do so will be when the government’s “lockup period” ends in May.

But according to the House Oversight Panel’s January update on TARP and the auto industry, for U.S. taxpayers just to break even on the government’s historic $50 billion “investment”, GM shares will need to trade at $54.28 — a whopping 65% premium over GM’s March 1^st closing price.

From the November IPO to the March 1^st close, GM’s shares have been range bound between roughly $34 and $39 per share. Does anyone really believe that we will see a 65% explosion to the upside for GM shares in the next several months? How about in the next year? Two years?

The fact is that it is increasingly unlikely GM will ever pay back the taxpayers. So why are we pretending this is anything other than a likely taxpayer loss?

Tomorrow, I will begin to show you what else GM is doing with its bailout money.