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White House's wager on GM is paying off

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White House's wager on GM is paying off

Automotive News -- May 24, 2010 - 12:01 am ET

With each passing week, it is clearer that the Obama administration's $50 billion bailout of General Motors was a wise investment of U.S. tax dollars.

Last week, just 10 months after emerging from bankruptcy, GM reported a first-quarter profit of $865 million. It was the automaker's first quarterly profit in three years and easily surpassed most predictions.

Significantly, GM had a 40 percent increase in revenue and generated $1 billion in cash. And since coming out of Chapter 11 last July, GM said, it has added more than 9,000 jobs and will invest $2.3 billion in North American factories.

Another positive sign came last week when it was reported that GM told the UAW it no longer will offer buyout packages to entice workers to retire early.

Then Larry Summers, director of the White House's National Economic Council, said that based on Wall Street projections about GM's market value, the government is likely to recover its entire $50 billion investment.

Making taxpayers whole will require a successful initial public offering of GM stock, which will allow the government to sell its 61 percent stake.

Even when you adjust for the likelihood of exaggeration in an election year, it is obvious that the Obama administration's wager on the long-term health of GM is paying off.

Had GM failed last year, it would have cost perhaps 250,000 more jobs at factories, suppliers and dealerships across the country and dealt a body blow to the economy.

The successful bailout proves that what's good for America is good for General Motors -- and vice versa.

Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20100524/RETAIL02/305249991/1424#ixzz0oqlOECYn

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