General Motors can be pretty ham-handed when it tries to manipulate public opinion. The latest gaffe involves the company's newest advertising campaign, bragging to the public that it paid off its $8 billion in government loans. Listening to those ads you might be misled into believing that GM had paid off everything. But it never mentioned the other $42 billion that taxpayers poured into the company.
That touched off a firestorm in Washington DC, on all the talk shows, and of course, all over the internet. Far from getting its critics to jump on the bandwagon, GM managed to infuriate the very people it needs to win over. A lot of the public now believes that GM tried to dupe them.
The irony is that GM is actually making significant progress to turn itself around. If the company was only more forthcoming and honest about what it's doing, it could bring a lot more people to its side.
To do so, it needs to make sure the government gets back the rest of that $42 billion. And it can. Uncle Sam now holds about 60% of the new GM in stock warrants. If that stock sells for a great price, the government could get every penny back, and possibly turn a profit. Now GM needs to dust off its history books to learn how to do it.
John McElroy is host of the TV program "Autoline Detroit" and daily web video "Autoline Daily". Every week he brings his unique insights as an auto industry insider to Autoblog readers.
You have to remember that General Motors was created by of one of the most brilliant entrepreneurs the world has ever seen: William Durant. You may not have heard of him because GM seems to have done everything but airbrush him out of the history books. It barely acknowledges he ever existed. Instead it heaps all its praise and adoration on Alfred Sloan, who succeeded Durant.
Indeed, after building one of the greatest industrial corporations in the world, Durant was forced out of GM. He died years later, nearly penniless, living his last years managing a bowling alley in Flint, Michigan.
Durant got his start when he became the General Manager of Buick in 1904. By 1908 he leveraged the fortune he created at Buick to launch General Motors. And then he leveraged GM stock to start buying up other car companies, like Oldsmobile, Cadillac, Oakland and AC Spark Plug. He had the vision to consolidate car companies and buy up suppliers to create one giant vertically-integrated automaker.
But he was too ambitious, over extended himself, and was forced out of the company. Undaunted, he went into partnership with Louis Chevrolet, and was so successful there that he began buying up shares in his beloved General Motors, ultimately taking it over again. Then he resumed his quest to build the greatest industrial corporation in the world, which included buying Chevrolet.
This is where it gets interesting. And this is where the current management at GM needs to pay attention. To ensure his investors were happy, and to boost the price of GM stock, in 1915 the company declared a dividend of $50 per share.
Fifty bucks! That was a lot of money in 1915. Even today that would be an astounding dividend. Adjusted for inflation it would be over $1,000. But man did it work. GM's stock shot from $100 a share to $400 in less than a week.
By my back-of-the-envelope calculations, GM needs to see its stock hit about $160 a share for the U.S. government to get back the remaining $42 billion. Durant would know exactly how to do it: create a buying frenzy by making an offer the market can't refuse.
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