GM announced yesterday its intention to go sell shares on the New York Stock Exchange, thus officially beginning the process of re-privatizing the company.
A GM initial public offering is the right move, and cannot happen soon enough. Let’s get the government out of the car business now.
But successfully reprivatizing GM should not be seen as a sign that the intervention itself was successful. The intervention was akin to theft – from Ford, Honda, Toyota, the other automakers and taxpayers – and was highly damaging to crucial longstanding institutions in the United States, like property rights and the rule of law.
The costs of GM’s ”turnaround,” if it is to happen, will never be fully appreciated. The other auto companies were denied the spoils of competition. Had they been able to pick up the market share that the nationalized GM has maintained, then more resources would have flowed to the companies that are best at making the products that people want to buy. These are huge implicit costs–the costs that are not seen–that are happily swept under the rug by Obama administration officials.
It is also highly likely that the timing of the IPO talk is politically motivated. Democrats want to have a business success to tout for their campaigns this fall. But there is the real prospect that that the IPO won’t raise anywhere near the amount of cash to make taxpayers whole, which could generate a lot of bad press before the election. With economic growth and auto sales prospects apparently in doubt and the $41,000 Chevy Volt about to be unveiled when gas prices are relatively low, investors may not be ready to own GM stock.