almost two years ago this month that General Motors Comp. (GM)
became the largest bankruptcy in U.S history and the
largest nationalization. Taxpayer money was spent restructuring the
The approach worked. The company has since been profitable and enjoyed a successful initial public offering of stock.
The only real issue for the company has been leadership turnover.
The company has seen
string of CEOs come and go -- Rick Wagoner, Fritz Henderson,
and, most recently, Ed Whitacre.
The current CEO, Dan Akerson recently sounded off in an
interview with The Detroit News, portions of which
will likely offend some readers.
Most notably Mr. Akerson called for a massive gas tax hike in the U.S.
commenting, "You know what I'd rather have them do — this will make my
Republican friends puke — as gas is going to go down here now, we ought to just
slap a 50-cent or a dollar tax on a gallon of gas. People will start buying
more Cruzes and they will start buying less Suburbans."
Mr. Akerson argues a tax increase would be a better way to "protect the
environment" and promote consumer fuel efficiency than direct increases
the U.S. Corporate Average Fuel Economy (CAFE) regulations. The
Obama administration and Congress are currently looking to extend increases in CAFE mandated fuel economy levels through 2025,
with the current round of increases wrapping up in 2017.
GM currently is the only member of the U.S. "Big Three" to offer an
electric vehicle. GM's Chevy Volt launched late last year and carries a $7,500
tax credit for buyers.
Mr. Akerson's comments echo those of a former senior advisor to President George W.
Bush, who also advocates raising gas taxes as the only
"practical" solution to escaping dependence on foreign oil.
Mr. Akerson suggested a tax of fifty cents or a dollar, which would make $4
USD/gallon gas cost either $4.50 or $5 USD/gallon. This is slightly less than GM's
previous suggestion to tax gas to $8 USD/gallon.
A Ford Motor Company (F)
spokesperson refused to endorse the suggestion to raise fuel taxes, commenting,
"[Ford] will leave the policy decision to Congress."
II. Akerson Praises Obama, Calls For More Taxes
The CEO, who bills himself as "a Colin Powell Republican — not a Sarah
Palin Republican", praised U.S. President Barack Obama, stating he'd
"done a pretty good job on the economy", which was a
"nightmare" when he received it from former President George W. Bush.
Aside from gas taxes to incentivize buying fuel-efficient vehicles, Mr. Akerson
also called for more taxes in general, stating, "Now, we need practical
decisions. I think you need to cut the hell out of the budget and you've got to
increase taxes … on everybody — including the middle class and the rich
He added that the U.S. government must increase the debt ceiling from $14.3T
USD, a change that Congress has until Aug. 2 to think over. He states,
"We're too good a nation to let ourselves be a banana republic" and
calls the possibility of a government default "unimaginable."
Such a default could harm auto sales, he argues.
III. No More Government Motors?
During the interview Mr. Akerson said he though the U.S. government would soon
divest its remaining stake in GM, commenting, "I actually think the
government will be out this year — within the next 12 months, hopefully within
the next six months."
"I have nothing but good things to say about them," Mr. Akerson says
of his government "investors", but adds that the relationships is
wearing on GM. He states, "It's kind of like your in-laws: It was a
nice long weekend. We didn't say a week."
The U.S. Treasury
Department once spent $49.5B USD to bail out GM and obtain a
controlling 61 percent stake in the company. It offloaded much of that
stake during the Nov. 2010 IPO. Mr. Akerson says a second PO could be
incoming, commenting "[The Treasury] will likely look at another (stock)
sale in August, after second-quarter earnings are announced."
His comments also hint that GM might buy back the stock directly, though he
would only say "But we have a lot of cash."
If the U.S. gov't sold its stake now, it would have lost $12B USD in taxpayer
money. But Mr. Akerson says that taxpayer sacrifice was worth it.
He comments, "We are in the midst of transforming an iconic American
company so 20 and 30 years from now (taxpayers) will look at this company and
they'll say, 'Absolutely it was the right thing to do.' And it shouldn't be
measured on did it sell for $43 or $53 (a share) or did they lose a couple
Part of what is depressing tax prices is a 500 million-share stock PO, which
has depressed prices of current shares 23 percent this year, down to $28.52
USD, well below the IPO price of $33 USD/share. Mr. Akerson admits,
"I think that it is an overhang — to have 500 million shares sitting out
there — it's a problem. They don't know when (the Treasury is) going to come
out. Investors hate uncertainty."
IV. Akerson Says Taxpayer Loss Was Worth It
Despite the reality that taxpayers will likely lose quite a bit of money, Mr.
Akerson infers that it's worth it and that taxpaying Americans are so
"generous" they will surely be happy to foot the bill.
He compares GM to a disaster stricken region like New Orleans post hurricane
Katrina, commenting, "We're the most generous country, even in terrible
times. We don't walk to the disaster as a nation. … We can't wait to
According to Mr. Akerson, CBS's "Face the Nation" has
invited him to be a guess, but complains he would be unable to go. He
bemoans the hostility of "fellow" Republicans, stating, "I can't
go on it. I'm toxic. I'm like a lightning rod. I couldn't have an intelligent
discussion without someone saying, 'He's a welfare guy from the bailout.'"
Those Republicans don't realize the effects of a GM liquidation, he argues, stating,
"If we had gone down, the supply chain would have gone down. … And Ford
was hanging on by its fingernails, too."
He argues that taxpayers "took one of the team", so to speak,
stating, "OK, we took the blow as a nation, we weathered the worst, and my
God, we're back. It's why I came here. It was a story of underdog that tripped
as we all have in our lives — it was a good feel-good story."
Mr. Akerson's interview will likely earn him some critics in Detroit, after he
concluded, stating, "I have not seen a city in this bad a shape [Detroit]
since I went to East Berlin in 1969."