Why Do Mid-Term Elections Impact GM’s IPO?
There are a lot of strong opinions about the auto industry bailout, pro and con. Like a lot of complicated issues, arguments from both sides have merit. However, it’s not as if the decision to bailout GM and Chrysler is recent. We all know it happened, we all have our opinions, and that ought to be the end of it.
But it’s not.
GM, it seems, is delaying their IPO until after the Nov. 2nd mid-term elections. What in the world do elections have to do with GM’s IPO?
Politics Shouldn’t Dictate GM’s Business
GM’s bailout definitely had political ramifications, but I’m one of these idealistic people who believes bailing out GM and Chrysler was the best option available. While I’m a believer in free-market capitalism, as an observer of the auto industry I recognize allowing GM or Chrysler to go under would have crippled the US auto industry. GM, and to a lesser degree Chrysler, use many of the same suppliers that companies like Ford, Toyota, Nissan, and Honda use.
If GM had gone under, it’s likely that dozens of major suppliers would have collapsed as well. The domino effect of suppliers going out of business could have killed a re-surging Ford, not to mention putting a lot of autoworkers, dealership employees, etc. out of work. The bailout prevented this from happening, and love it or hate it, this decision might have even helped to prevent a deeper recession (maybe – only the historians will know for sure).
In any case, the bailout is done, right? GM has paid back their $6.7 billion loan, and perhaps someday in the future stock sales are going to return the rest of the $50 billion the US government provided to prevent GM’s collapse.
Yet GM isn’t allowed to start selling stock until after the mid-term election. This decision has been made by officials at the Treasury department, and I suspect it’s because they don’t want to confront the following fact until after the elections are over:
GM’s bailout isn’t a money-maker for taxpayers.
Is that a surprise to any thinking American? Why, then, are politicians dictating GM’s financial policy?
Filed Under: Auto News