The U.S. government should “sell every last share it owns” of General Motors Co. (GM) or else the company will be seen as a failure, former Chief Executive Officer Ed Whitacre said in a Wall Street Journal op-ed commentary.
“The government has been an active participant in GM’s management for more than three years, and that’s long enough,” Whitacre wrote in the newspaper. “It’s time for the Treasury to step out of the way.” Jim Cain, a GM spokesman, didn’t have an immediate comment.
Whitacre’s commentary doesn’t reference the U.S. presidential election. The auto industry bailout in 2009 and the U.S. government’s role in saving GM have been debated by the campaigns of President Barack Obama, a Democrat, and his Republican challenger, Mitt Romney.
Whitacre wrote the U.S. Treasury’s $50 billion rescue of GM has been a “resounding success,” saying millions of jobs were saved. If GM had failed, other automakers and suppliers “would likely have followed,” Whitacre wrote.
The former CEO said that while GM’s November 2010 initial public offering “was a roaring success,” the company will never shed its “Government Motors” image as long as money from the Troubled Asset Relief Program is involved with GM.
GM dipped 1.3 percent to $24.42 at the close in New York. The U.S. Treasury holds 32 percent of GM and is the automaker’s largest shareholder. GM has declined 26 percent since its IPO.
Whitacre, 70, was Detroit-based GM’s CEO from December 2009 to September 2010. He joined GM as the Obama auto task force’s pick for chairman as the automaker emerged from bankruptcy reorganization in 2009. Whitacre was chairman and CEO of AT&T Inc. (T) and its predecessor, SBC Communications Inc., from 1990 until 2007. He built AT&T into the largest U.S. phone company.
At GM, he pushed out then-CEO Fritz Henderson, who had guided the automaker through the bankruptcy. Henderson resigned after GM directors concluded he hadn’t done enough to fix GM’s finances and culture in a 100-day review following the July 10 bankruptcy exit, people familiar with the matter said at the time.
Whitacre then got rid of four executives, reassigned 20 more and brought in seven outsiders to fill jobs within three months. He supervised preparation of GM’s IPO before announcing in August 2010 that he would step down as CEO Sept. 1 and as chairman at the end of that year.
Dan Akerson, a company director, succeeded him and remains CEO. Whitacre decided to leave because he was under pressure to commit to staying at GM as part of the IPO process, people said at the time.
GM’s IPO raised more than $20 billion selling common and preferred stock, and its owners, including the U.S. Treasury, sold at least $15.8 billion of common shares at $33 each. That made it the second-largest U.S. IPO on record after Visa Inc. (V)’s $19.7 billion.
Christy Romero, special inspector general for the Troubled Asset Relief Program, told a U.S. House subcommittee in July in written testimony that the Treasury needs to sell GM shares at $52.39 or $53.98 per share to break even.
“Due to the enormity of Treasury’s stake, it could take a number of years for Treasury to sell at or above break-even,” Romero said in the statement.
As CEO, Whitacre was eager to get the government out of GM’s business, saying in August 2010 at an industry conference in Acme, Michigan: “We don’t like this label of Government Motors. We know it turns off customers. It turns us off.”
Whitacre wrote in the Journal that as planning got under way for the IPO, he pushed for the government to sell its entire stake on the first day.
“I thought that parting ways in one clean sweep would send a strong signal to Wall Street and the world that GM was back,” he wrote. “If the stock sale fell short, GM could use its own cash to make up the difference, ensuring that U.S. taxpayers got repaid in full. This, to me, was a win-win: GM could return to running its own business, and Treasury could rightly declare victory on the auto bailout.”
Nobody with the “decision-making authority” on the IPO liked the idea, he wrote.
While the U.S. government no longer has a majority stake, it still exerts control over GM through the Troubled Asset Relief Program, Whitacre wrote.
“TARP is funded by taxpayers, so there are many rules about how that money can and can’t be used,” he wrote. “The result: GM spends an awful lot of time checking in with the people who administer TARP over everything from hiring to executive compensation and management. For a global company, that adds up to a lot of distraction.”
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