• May 3, 2010
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.

You may not have heard of Durant because GM seems to have done everything but airbrush him out of the history books.
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.

GM needs to see its stock hit about $160 a share for the U.S. government to get back the remaining $42 billion.
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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    • 1 Second Ago
  • 33 Comments
      • 4 Years Ago
      Aren't we forgetting something here??? They used TARP (taxpayer funded) money to pay us back... so really they took our money, then said it was from them.

      Pay us back every dime, plus interest GM. If it wasn't for us, the little person, you wouldn't be here right now.
      • 4 Years Ago
      This is more proof of just how stupid or ignored the marketing/PR folks inside GM are...

      Firing Campbell-Ewald won't matter because GM will continue to shove BS down the throat of whatever ad agency they hire...

      230 mpg anyone?
        • 4 Years Ago
        I swear if GM gets away with posting some ridiculus number on the Volts window for MPG, I'll snap its super easy to figure out its mpg's whats the gas motor get I heard 50mpg so thats what the Volts number should be, who cares that it can drive a whole 40 mpg on battery, The Tesla roadster can triple that and it only has one gear. I am just saying its a far cry from 230 mpg that GM is lying about, and the money is just crazyness we "payed it all back" YA right. The version of that commercial for Canada is just as bad every time I see it makes me want even less to ever own another GM. And trust me I never will.
      • 4 Years Ago
      What about AIG?
      • 4 Years Ago
      Oh great. It's not enough they accept all kinds of hard working citizens stolen money, but they used it to employ full time trolls, too? What a disgrace.
      • 4 Years Ago
      Oldsmoboi is correct which means that GM should be printing up about 86 Billion shares to start off the IPO.That is an optomistic valuation on a company that has yet to earn a profit.
      • 4 Years Ago
      Fritz, you hit the nail on the head.

      McElroy lauds Durant for using leverage to buy out the competition in essence to create a monopoly in the automotive business. Pretty much exactly what happened and forced the majority of smaller automotive enterprises to close up shop because they could not compete on the same economy of scale.

      Durant then went on and used a despicable tactic of stock manipulation, really bribery, to get people to purchase shares of GM. Is it legal, yes. Is it really ethical, no. People bought shares because they were going to get a big payoff. The stock priced soared and the initial shareholders of GM made out like bandits. Actually the stock price allowed the manipulators to pay off the debts they used to leverage the stock and pocket the difference.

      So John McElroy supports a plan that would have GM offer a fat incentive to buy GM stock which in turn would create a feeding frenzy over the shares sending the price far above what the normal market would bear. This would give the US government a healthy return on its investment in GM and "pay back" the American people. I say that in quotes because the American people will never see a dime of the money. What is taken is never given back.

      It really makes sense to follow that plan. The problem is that it is making money out of thin air and only through manipulation of paper, not through hard work or by the company actually producing something of value. That is why the stock market is a total scam and needs to be shut down. The end result of public enterprise is a handful of monopolies controlling all commerce and a tiny minority holding all the wealth.

      The best thing would be to sell GM off as a private corporation and bar them from ever going through an IPO. During that process all pensions and union contracts would be terminated. Force the company to make it by selling cars people want to buy or go out of business. In fact the entire public market should be forced into privatization. Accounting manipulation has allowed weak corporation to grow into institutions with so much power and political control that they have been deemed to big to fail, even though in a private market they would have failed 100 times over.

      That is why GM needed to fail. The BS bankruptcy and restructuring didn't do a thing to ensure the long term solvency of the corporation. Nothing has really changed and GM will be back on the brink of collapse within the next decade.

      Even worse is that if the government can manipulate GM stock to the point of turning a few billion in net profit they will have found a new avenue to address the budget shortfalls they face. Just take over public corporations and issue stock after a government restructure. Something that really does spell doom for the American public.

      • 4 Years Ago
      Forthcoming and honest is nice, but the most important thing is for GM to be CLEAR... laying out IN NO UNCERTAIN TERMS exactly what they owe (or believe they owe) and when it will be repaid. No PR speak. No semantic games. Just lay it all out on the table, please.

      Loans, bailouts, and cash infusions and market share allocations are all different things, fine, but they're all the same thing to taxpayers - money that used to be theirs being used to keep GM afloat. GM has lost control of its message; a message it never put a lot of effort into controlling in the first place! They seem to be doing ok; they have great products in the pipline; great. But that's another issue.

      The message GM needs to send is as follows, and it ain't rocket science: This is what we've paid back. This is what we still owe. This is how we'll pay you back. This is when we'll pay you back. If they are forthcoming, honest, and sparkling clear with the facts, they can salvage this.

      Also, for the love of God, GM, keep your old, white, crotchety, aristocratic, arrogant, obtuse millionaire Whitacre out of your TV ads. It's bad enough Dan Hesse does Sprint commercials. Watching a CEO talk down to his audience and stroke his ego under the guise of earnest folksiness doesn't do anything but irritate me, especially when you're trying to pull a fast one on the less-informed bastions of the tax base who eat up such schlock.
        • 4 Years Ago
        It's the government's decison now when the reamaining money gets paid back. Only they can sell their portion of the ownership and turn it into dollars for them. GM cannot force-sell the ownership that the Gov't has in them.

        Now, for that to happen, first we need an IPO. GM has already stated numerous times that they are shooting for an IPO late this year. Beyond that, it's up to the market and the gov't to determine when and how much of the money gets paid back.

        It's pretty hard for GM to come out and say theis is how and when we will pay you back when it isn't up to them to determine that. Their main goal is to get to the IPO stage so that the rest of it can play itself out and they are doing exactly that.
      • 4 Years Ago
      My thoughts exactly expert...its funny how people want to see a company fail that employs people to pay taxes instead of collecting an unemployment check. Yes..they have nothing to pay back because we the people own the 60 odd percent of the shares of stock...and whether they paid money back from one pocket or another who really cares..they gave it back..last I checked the banks gave the money they didn't need to the presidents and executives of those firms and nothing was said other than ... "that wasn't right" I am sick of the banter bashing of GM...they make good cars and it's an AMERICAN company...not Japaneese, Chineese, Korean, Indian or the like..if you hate our country so much to hope for GM to fail then move.
        • 4 Years Ago
        +1
        Good to see some people have seen the trees and know they found the forrest.
      • 4 Years Ago
      The only people I see bringing this up are people who are wholly uneducated and/or bias against GM. GM HAS NOTHING MORE TO PAY BACK. The other $42 bn you are so fond of saying they still "owe" was paid in equity. The government can sell it privately AT ANY TIME and publicly as soon as there is an IPO. They sold 60% of their company for 42 bn and got loaned 8 bn more. They paid back 8 bn out of escrow from the money they got for the 60% stake in the company. This is not hard to understand. It's extremely simple, and the ad wasn't misleading at all.

      If you have two brain cells to rub together, you would by saying, "great, let's hope the IPO goes well!"

      Really, you should be asking for the $500 billion that went to Wall Street. At least when the government LOANS $50 bn to the auto industry we get American jobs and cars.
      • 4 Years Ago
      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.

      It actually never mentioned they paid off the loan using another source of government money, essentially not repaying anything.
        • 4 Years Ago
        @nickybeans930 Where do you think that escrow money came from? Oh yeah it was from TARP.
        • 4 Years Ago
        Not one to defend GM here, but right is right. GM didn't actually use TARP funds to repay TARP funds. There was money set aside in escrow that was used.
        But still... they have $42 billion to go before they can really start crowing about loan repayment.
        And a slogan like "Excellence for All" isn't going to help any.
        • 4 Years Ago
        BINGO! Thank you for realizing what GM did to us in their BS ad... It also had Ed Whitacre "arrogance" written all over it....!!!

        As the ole saying goes - "you can fool me once, shame on you, fool me twice, same on me" - NEVER... won't ever buy a GM product... !!!

        ... did you notice we haven't seen that stupid ad on TV in days...
      • 4 Years Ago
      Truth be told, until the fabled volt and the voltec powertrain are proven to be winners...or at least able to be sold, GM stock will hold a low value. They just have too much up in the air right now. And what good are dividends if the company can't afford them?
      • 4 Years Ago
      I agree that GM needs to be 100% honest about their situation. GM should use the debt as a marketing strategy, "If you buy our product, you will get your tax dollars back." That's a pretty heavy incentive.
        • 4 Years Ago
        Or change all incentives to "Buy xxx model, get n shares of stock in the new GM". Make it so the exchange rate is $200 profit/share. The higher profit models would have more shares attached. :-)
        • 4 Years Ago

        You know damn well they got marching instructions from someone in Washington. That press release was created to divert attention and bring a marker into the success column.

        • 4 Years Ago
        If you think these guys (GM and the Obama admin) don't know what they're doing then you're mistaken. What you'll eventually see is a "pump and dump" on a scale never before seen by human kind. GM will be truly debt free, the gov't will get our money back, and the only ones hurt are those suckers dumb enough to believe the hype. It happens every day on a smaller scale, we're just going to see the whole scheme kicked up a notch. You watch.
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