An analyst at Jeffries provides some full frontal snark about GM's recent performance:
How many large-cap IPOs have you bought over the last six months in which the issuer already missed initial expectations by 30% and were hit with senior management turnover? This is what seems to have happened at GM since the November IPO, yet few analysts seem concerned. We struggle to understand why.
That break will reduce GM's U.S. tax bill by an estimated $14 billion in the coming years, and its global taxes by close to $19 billion, according to a company filing.
Companies typically get a break on future taxes because of past losses. But in most cases they lose that tax break during bankruptcy, because the losses are offset by the "income" the company receives from shedding its debt.
Since the company shed $30 billion in debt during bankruptcy, it should have wiped out most of the tax break. GM even warned it expected to lose those tax breaks shortly before filing for Chapter 11 protection.
But somehow, that never happened, and the automaker was able to keep most of its tax breaks, essentially receiving a $14 billion "gift" from the government.
While it's unclear why GM was allowed to carry over its losses, some experts insist that GM got preferential treatment.
Government failure gets a lot of coverage. That's useful because government should be held accountable for its mistakes. What's not okay is that we hear very little when government acts competently and even creatively. For if mistakes teach lessons, successes teach lessons, too.
In the case of the car industry, allowing the market to operate without any intervention by government would have wiped out a large part of the business that is based in Midwestern states. This irreversible decision would have damaged the economy, many communities and tens of thousands of families.
And contrary to critics' predictions, government officials were quite capable of working with the market to restructure the industry. Government didn't overturn capitalism. It tempered the market at a moment when its "natural" forces were pushing toward catastrophe. Government had the resources to buy the industry time.What lesson, exactly, are we supposed to learn from this "success"? What question did it answer? "Can the government keep companies operating if it is willing to give them a virtually interest free loan of $50 billion, and a tax-free gift of $20 billion or so?" I don't think that this was really in dispute. When all is said and done, we will probably have given them a sum equal to its 2007 market cap and roughly four times GM's 2008 market capitalization.
Government officials are willing to take the loss because the Obama administration would like to sever its last ties to the auto maker, the people familiar with the matter said. A summer sale makes it more likely Treasury could sell all of its stake in GM by year's end, avoiding a potentially controversial sale in the 2012 presidential election year.GM is profitable, which is certainly better (for them and for us) than being unprofitable. But the government's job is not to make individual companies profitable, because it's not very good at it. The only way it knows how to do it is to indiscriminately throw huge sums of taxpayer funds into the kitty. But that's not exactly something to celebrate.
. . . At the time of the IPO, Treasury officials and banks underwriting the deal believed the price would climb through the winter, enabling the government to sell most or all of its remaining stake within weeks of the lifting of the sales restriction at a narrower loss to taxpayers, the people familiar said.
Shares have fallen by recent events that have undermined investor confidence in GM. Those include the rise in gas prices, which hurt sales of big, highly profitable trucks. Wall Street also is fretting over recent management moves such as the unexpected departure of Chief Financial Officer Chris Liddell.
Investors also were spooked by GM's sales-incentive blitz in January and February, which could temper the auto maker's first-quarter earnings. GM is expected to report next month that it made money in the first quarter and generated cash from operations, people familiar with the matter said.
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