Exaggerating harm of Treasury’s continued GM stock ownership

Few consumers concerned about the government stake in GM

To the extent that there are consumers who might have qualms about the continued Treasury stake in GM, it is difficult to disentangle those qualms from other concerns arising from the company’s decline and fall in 2008 and 2009. Sean McAlinden, the chief economist at the Center for Automotive Research, said that the company’s bankruptcy, the auto bailout, and continued Treasury department ownership each have played a hard-to-quantify role in alienating some consumers. To the extent that disaffection with GM stems from the underlying bankruptcy or bailout, McAlinden said, those concerns are unlikely to “fade away with the sale of government ownership, especially if it makes permanent a loss of over 15 billion dollars [to taxpayers].” Dave Sullivan agreed: “Selling the Treasury stake right now is not going to change [some] people’s minds, the damage [from bankruptcy and bailout] is done. And it is just a long term wound that will have to heal.”

Despite the wound, according to Efraim Levy, “the bottom line is most people are looking at the value they get when they make a purchase.” In the case of GM this bodes well, according to Dave Sullivan: “They have the goods to compete with everybody else. They have models that get very good fuel economy [and] they really have a very good array of products. I think when people go to look at them and see them on the road…they really have an attractive fleet of vehicles to offer. That is what can really change people’s minds…The product lineup that they have invested in is really doing well for them. And it is really competitive.”

Where is the evidence that Treasury ownership concerns consumers?

Despite recent attention to GM’s purported “Government Motors” stigma, Jared Bernstein, the former auto task force member, is skeptical of the significance of those claims, saying, “I’ve just never seen the evidence of that.” Greg Martin, GM’s executive director of communications, agreed: “I can’t cite you marketing data [showing an impact]…if that is what you are looking for. I can’t.”

Since the Treasury Department led GM through bankruptcy, meanwhile, the company has continued to bring new models to market and has moved out of the red, reporting a $7.6 billion profit in 2011. Additionally, its U.S. sales have grown from a low of fewer than 2.1 million vehicles in 2009 — about the same number of vehicles GM sold in the U.S. in 1962 — to over 2.5 million in 2011. Last month, meanwhile, saw GM post a 10 percent increase over its August 2011 sales. “Nothing is perfect,” Bernstein commented, “but these are not the numbers of a company that everybody is shunning because the government is a shareholder.”

Despite the desire to have Treasury sell it’s shares, GM’s Martin pointed out that “the interesting thing is that Ford actually lost market share more than we have during this period [2009-2010].” Indeed, according to data from WardsAuto.com, not only did GM’s global market share decline by marginally less than Ford’s from 2009 to 2010, but its market share grew more rapidly than Ford’s in both absolute and relative terms between 2010 and 2011. “If you were to write that based on sales and revenue alone that there is no discernable effect on the company,” Martin said, “I wouldn’t talk you off that.”

Why talk about it at all?

Isn’t it actually counterproductive for GM to keep a concern about “Government Motors” in the public eye? Even as Greg Martin reiterated that “we look forward to a quick and orderly exit sooner rather than later,” he acknowledged that discussions of government ownership issues at GM “diverts from the real and significant progress that this company has made.”

Sean McAlinden, the chief economist at the Center for Automotive Research, believes that the chatter about getting rid of Treasury ownership is a function of the style of GM’s chief executive: “Mr. Akerson, if he has a plan, it is to be impatient all the time.” McAlinden said that this impatience contrasts with what had been a “terrible culture of indecision, vested interest, [and] round robin delay.”

But, as Dave Sullivan put it, “If I were GM I would probably keep my mouth shut and work really hard to keep that stock price up so that I can give the Treasury a reason to sell, instead of asking them to do it.”