Obama Says Auto Industry `Again on the Rise' After $20 Billion GM Offering
President Barack Obama said General Motors Co.’s return to the stock market shows the U.S. auto industry is on the rise and will result in taxpayers getting their money back from a government bailout.
“Today, one of the toughest tales of the recession took another big step towards becoming a success story,” Obama said at the White House after GM raised more than $20 billion from investors.
GM received a $49.5 billion taxpayer bailout last year and the U.S. Treasury will get as much as $13.6 billion from the initial public offering. For taxpayers to be fully repaid, the remaining shares held by the government would have to be sold at an average of about $53 each to make back its total investment, Bloomberg data show. GM gained 3.6 percent to $34.19, paring a climb of 9.1 percent.
Obama defended the politically unpopular bailout of GM and Chrysler Group LLC. Failing to act would have “resulted in economic chaos,” he said.
“We’ve still got a long road ahead and a lot of work to do to rebuild this economy,” Obama said. “We are finally beginning to see some of these tough decisions that we made in the midst of crisis pay off.”
He said taxpayers are “now positioned to recover more than my administration invested” in the company. The IPO would lower the government’s stake to 37 percent from 61 percent.
White House press secretary Robert Gibbs said earlier today that the administration hopes the government can sell its stake in GM by mid- to late 2012.
The bailouts were cited by some Republican critics of the administration during the campaign for the Nov. 2 midterm congressional elections. Republicans won a majority of seats in the House of Representatives and narrowed the margin held by Obama’s Democratic Party in the Senate.
House Republican leader John Boehner of Ohio, set to become House speaker in January, today continued criticism of the bailout.
He said GM could “have been handled in a more orderly way by a bankruptcy judge without the heavy hand of the federal government.”
In an Oct. 7-10 Bloomberg National Poll, 34 percent of adults said they believed the automaker bailouts would lead to a stronger economy, while 41 percent said it would weaken the economy. Forty-five percent of likely voters said they were less likely to support a congressional candidate who voted in favor of the aid.
GM wants to shed the government as a shareholder as well.
Company Chairman Ed Whitacre said during an automotive conference in August he was eager for the U.S. to sell its shares because it would boost employee morale and help GM sell more vehicles.
“We don’t like this label of Government Motors,” Whitacre, 68, said.
The Obama administration stepped in to aid GM and Chrysler with money from the $700 billion Troubled Asset Relief Program after Congress failed to act.
In response to public dissatisfaction over the bailout, the administration has cited a study that shows the aid helped save more than 1.3 million jobs. Obama made repeated trips to automobile factories over the summer to highlight their success.
“A lot of the public animosity to the bailouts is based on principle as much as it is on performance,” said Chris Borick, director of the Institute of Public Opinion at Muhlenberg College in Allentown, Pennsylvania. “Even the good bottom-line news from GM won’t necessarily overcome the broader dislike of government support for struggling corporations.”
Karlyn Bowman, a specialist on public opinion at the American Enterprise Institute, a policy research group in Washington, said the automaker aid “was certainly one of the things that contributed to the perception during the election that government was doing too many things.”
Obama isn’t likely to benefit substantially from the GM IPO because his other big initiatives, health-care and financial regulatory overhauls, fell flat with the public, said Bruce Buchanan, a political scientist at the University of Texas in Austin.
“If these other bigger deals didn’t have an impact on Obama’s political fortunes and standing, it’s hard to see how this one will,” Buchanan said. It may provide a “momentary lift.”
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