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Pres. Obama Set to See Auto Industry’s Resurgence With Auto Show Tour

Legacy likely to include bailouts and safety moves.

by on Jan.20, 2016

Then-candidate Obama at a Jeep plant.

In the run-up to the 2008 presidential election, then-candidate Barack Obama found himself focused on an American auto industry plunging into one of the worst downturns in its history. Among his first duties as president, Obama approved billions of dollars in loans to keep two of Detroit’s bankrupt automakers afloat.

Now, as the two-term president enters his last year in the White House, he’s heading to Detroit for what might be dubbed a victory lap, a chance to see firsthand an industry reporting record sales and, for many companies, record profits.

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As the center of the trip, President Obama will make a stop at the 2016 North American International Show which opened its doors to the public last Saturday after a two-day media preview that brought the debut of about 50 new cars, trucks, crossovers and concept vehicles. Preliminary attendance suggests turnout for the show could also reach record numbers.


GM Says it Didn’t Ask Feds to Sell its Stock

Treasury in no rush to "dump" GM shares.

by on Sep.18, 2012

The government plans to look for the most opportune time to sell, a Treasury official stressed.

General Motors is denying a report that it pressed the White House to sell off the remaining shares of GM stock held by the U.S. Treasury.

Sources inside the company insist the two reluctant partners have agreed that they will wait until an acceptable and appropriate time to sell the 500.1 million shares still held as a result of the government bailout of GM that followed the maker’s emergence from bankruptcy in 2009.

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A report in the Wall Street Journal today indicated GM had pressed Washington to sell off that 26.5% stake as soon as possible, but spokesman Greg Martin insists the maker is taking the position that “it’s Treasury’s decision,” much like any other investor. And for now, a top Treasury official said there is no rush to “dump” GM stock.


American Auto Industry A Highlight in Obama State-of-the-Union

“The American auto industry is back.”

by on Jan.25, 2012

Pres. Obama giving the state-of-the-union address.

At a time when the American government appears all but paralyzed by partisanship, where concerns remain about the U.S. economy and an upcoming election raises questions about the fundamental direction the nation must take, President Barack Obama came out swinging as he began his state-of-the-union address on Tuesday night.

And the president put the spotlight on two key success stories as a highlight of both what the nation can achieve – and what he and his administration have accomplished.  Members of both parties quickly jumped to their feet as he praised the men and women of the American military.  But there were cheers yet again when he turned to manufacturing and, in particular, to revival of the auto industry.

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“We bet on American workers.  We bet on American ingenuity.  And tonight, the American auto industry is back,” the president proclaimed.

It was an in-your-face reference to the controversial, $85 billion bailout of General Motors and Chrysler, a move that still has many conservatives referring to the two manufacturers as “Government Motors,” nearly three years after they entered bankruptcy, and despite their collective recovery.


Obama Claims New Korean Trade Deal Will Create 70,000 New U.S. Jobs

President also says Detroit bailouts “worth it.”

by on Oct.14, 2011

South Korean President Lee Myung-bak reacts as U.S. President Barak Obama addressed workers at a GM plant in Michigan.

President Barack Obama outlined the promised benefits of the nation’s new trade pact with Korea during a trip to a suburban Detroit assembly plant, suggesting the agreement will generate 70,000 new U.S. jobs – but he drew an especially enthusiastic response from workers when he proclaimed the controversial federal bailout of General Motors and Chrysler “worth it.”

The president journeyed to the Lake Orion assembly plant where he was joined by both South Korean President Lee Myung-bak – who wore a Detroit Tigers baseball cap for the occasion — and United Auto Workers Union President Bob King.  King broke with other national labor leaders this week by lending his support to the trade agreement.

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“The investment was worth it,” Obama said of the $85 billion spent on the domestic auto industry.  Speaking to a cheering throng of workers, the president added that, “This is a city where a great American industry is coming back — and a city where people are dreaming up ways to prove all the skeptics wrong and write the next proud chapter in the Motor City’s history.”

The decision to take his message to the Orion plant was a significant one considering that the factory is producing a small car – the Chevrolet Sonic – that was previously built in South Korea.  GM credits the labor cost reductions it was granted by the UAW in recent years for helping move that production back to the States.  Still, a worker advised the president during his half-hour tour, 27% of what was previously known as the Chevy Aveo still comes from Korea.

President Obama shakes hands with General Motors workers after touting a U.S. trade agreement with South Korea.

The president stressed, during his speech, that the new Korean trade pact – one of an assortment of similar agreements approved by Congress this week – will pay off in many ways.  Most significantly, however, the administration claims it will open up the long-restricted Korean market to U.S. automotive imports.

Late changes to the Korean trade agreement were designed to bolster exports to the Asian nation while preventing a flood of Korean vehicles into the U.S.  The so-called “chicken tax” on foreign-made light trucks, for example, will take 8 years to phase out and should prevent makers Hyundai and Kia from moving ahead with long-discussed plans to start building pickup trucks that could establish one of the most profitable market segments for Detroit’s Big Three.

Until now, automotive trade has been extremely lopsided.  Koreans bought just 7,500 American-made automobiles in 2010 while Korea shipped 562,000 vehicles to the States – a figure that does not include the rapidly-increasing number of vehicles produced at two Korean-owned assembly plants based in the U.S.

The opportunity to level that imbalance in trade helped convince UAW President King to give the agreement his backing, even as other American labor leaders sharply criticized its passage.  (Click Here for that full story.)

Speaking through an interpreter, the blue-and-white Tigers cap on his head, Lee told the GM workers, “I want to give this promise to you, and that is that the (trade pact) will not take away any of your jobs. Rather, it will create more jobs for you and your family, and it is going to protect your job. And that is the pledge that I give you today,”

Ironically, GM could benefit from any expansion in business for Korean automakers as it is that nation’s third-largest carmaker after having purchased the bankrupt Daewoo a decade ago.  A full 20% of the vehicles sold worldwide under the Chevrolet nameplate are produced by GM in Korea.

GM Stock Ends First-Day Trading Over $33

Rise follows biggest IPO in history.

by on Nov.18, 2010

General Motors CEO Dan Akerson (center) rings the opening bell at the New York Stock Exchange Wednesday morning.

General Motors Co.’s new stock closed above the IPO asking price, reaping more than $20 billion for the principal sellers — including the U.S. Treasury – finishing first-day trading on the New York Stock Exchange at $33 per share.

“They marketed the heck out of this thing. It was bigger than the iPad and the iPhone,” said one analyst, who credited the apparent success of the GM IPO to the skillful sales job done by CEO Dan Akerson.  Akerson marked the milestone day by ringing the opening bell at the New York Stock Exchange, colleagues GM CFO Chris Liddell and vice chairman Steve Girsky at his side.

Akerson said the IPO was a great day for the company, which can put aside its government motors tag for  good.  Before the IPO, the U.S. Treasury owned 61% of GM under the terms of the 2009 bailout.  After the IPO the stake was reduced to about 33 percent, Liddell said, adding that when additional shares demanded by underwriters are accounted for, and while considering the convertible preferred stock also issued through the IPO, the Treasury share slips closer to 28%.

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Liddell also noted that while some sovereign wealth funds from abroad did participate in the initial public offering, 90% of the new GM shares were sold within North America. The allocations to various buyers included a $4 billion for retail buyers in the U.S.

“We thought it was important for there to be a retail allocation,” Liddell said.

Treasury Could Recover GM Investment – Sort Of.

Obama investment likely to be reclaimed; Bush bailout lost.

by on Nov.04, 2010

The White House couldn't get the "Obama number," a proposed $30 IPO price, but still hopes to cut its losses with GM's stock sale.

Just how much money will the U.S. Treasury lose when General Motors holds its long-awaited IPO later this month?  That depends on who you ask and how you count, it seems.

By one accounting, taxpayers could get all their cash back – or at least all the cash committed to save GM by the Obama Administration.  Money previously invested by former Pres. George W. Bush, however, is gone for good, apparently.

On Wednesday, the restructured GM provided key details of the upcoming initial public offering, most importantly noting it will be priced between $26 and $29 per share.  Missing in the GM announced was the precise timing of the IPO, which most sources indicate will be staged on November 18th.

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Senior GM managers have already begun fanning out around the world to pitch the merits of the stock sale, which will notably take the government’s stake down from 60.1% to around 40%.  That would make the Treasury a minority shareholder – but still give it the single biggest block of GM stock.

Even now, however, it appears that having a majority stake didn’t ensure the White House got everything it wanted.

Bloomberg News, for example, is reporting that representatives of the government pressed for the “Obama number,” a price of $30 a share.  That figure would have ensured that the Treasury wouldn’t post a lost for the $36.1 billion the current administration came up with, post-Chapter 11.

Even that figure would fall share of recovering the full $49.5 billion GM bailout, leaving for a loss the billions initially invested during the final days of the Bush Administration.  To recover that money, as well, would require a $44 share price – and that after a 3-for-1 split of the government’s stock.

Underwriters, including Citigroup and JPMorgan Chase, had wanted an even lower number, perhaps $20 a share, which would make GM look even more appealing based on earnings; the maker yesterday projected it would show a profit of as much as $2.1 billion for the third quarter, its third quarterly profit in a row, following its emergence from bankruptcy last July.

Ultimately, all sides agreed on the current range – the bottom number apparently set while watching the performance of Ford Motor Co. stock, which has staged a more than tenfold run-up since early 2009.

Depending on what the final price settles in at during the IPO, the government could lose as much as $5.4 billion.  But the hope is apparently that by delaying the sale of the remaining 40% held by the Treasury, GM shares will zoom even higher, reducing future losses.

As things stand, the projected losses for all auto-related bailouts, including Chrysler and what is now known as Ally Financial, could come in at $17 billion – but that’s still down from earlier estimates of $28 billion.

A spokesman for the White House, Robert Gibbs, called “encouraging” initial indications of support for the upcoming IPO.  He also denied that the administration had approved the use of private planes to make it easier for senior GM officials to conduct their “road show” with potential investors.

Less confident was Senator Charles Grassley, an Iowa Republican and critic of the bailout.

“Short of a miracle, the initial public offering won’t repay the taxpayers. The onus is on the Treasury Department to come up with a plan to make sure taxpayers get their money in full,” Grassley told the Detroit News.

Opinion: Obama Deserves Cheers As He Tours Detroit Auto Plants

Ongoing Big Three upturn shows bailout was worth it.

by on Jul.30, 2010

Recent events should make it easier for President Obama to promote the bailout of GM and Chrysler.

Whichever side of today’s highly partisan spectrum you fall on, there’s little doubt President Barack Obama’s visit to Detroit is clearly political in nature.  But why shouldn’t it be?  In an era when the merits of almost everything the government does is debated, ad nauseum, the current occupant of the Oval Office has reason to come crowing as he tours a pair of domestic auto plants.

Despite the strong criticism leveled against the bailout of General Motors and Chrysler, last year, there’s growing evidence the tens of billions of dollars invested into the automakers was worth the risk – and that we taxpayers actually may get much, perhaps all, of our money back when the two makers go public once again.

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At a time when critics of the White House weep over the inability to generate jobs – while resisting the need to prop up those out of work – one can only imagine just how deep a hole the American economy might have toppled into had GM and Chrysler been written off.  By most accounts, 1 million jobs were directly at risk, never mind the multiplier effect their collapse would have had on the broader economy.