August 7, 2010

As GM Plans IPO, AP Finally Makes Prominent Reference to Drivers’ ‘Resentment’ of Bailout

Filed under: Business Moves,MSM Biz/Other Bias,Taxes & Government — Tom @ 10:58 am

GovernmentMotors0609In what I believe is the first direct acknowledgment by the wire service of what so many have known for so long, the Associated Press’s Tom Krisher wrote the following in an August 5 story about plans for an initial public offering by government-controlled General Motors (bolds are mine throughout this post):

Ever since the Obama administration gave the automaker a $50 billion dollar survival loan last year, many drivers have scorned the company and bought cars from rivals. Even though GM has cut costs, changed leadership, and reported its first quarterly profit since 2007, the resentment will linger as long as taxpayers have a 61 percent stake in the company.

Actually, the “resentment” goes back to December 2008, when the Bush administration bowed to pressure to use Troubled Asset Relief Program funds to “temporarily” loan a combined $13.4 billion to GM and Chrysler. Also, the total bailout dollars involved are at least $63 billion when GMAC is included, as it should be.

If you have relied exclusively on AP reports and its news feeds to subscribing publications since then, Krisher’s assertion that “drivers have scorned the company” would more than likely be the first time you have seen an AP reporter record that observation.

Any AP reporter covering the company almost any time in the intervening 20 months could have observed the existence of the scorn and resentment. But if this factor has ever been directly cited by an AP reporter covering the car industry until now, I haven’t seen it.

In January 2009, the first month after those “loan” funds were disbursed, year-over-year sales at GM fell 49%. In previous months, the struggling automaker’s year-over-year declines had been in the 30% range. In just one month, the company’s sales decline in the recessionary economy went from roughly matching those seen at archrivals Ford and Toyota to about what cratering Chrysler was experiencing.

GM’s sales plunge of 42% during last year’s first five months was far worse than Ford’s or Toyota’s, though not quite as bad as Chrysler’s.

During 2009, I only recall two instances where AP got into the neighborhood of explaining what was really going on. The first was in a May 1, 2009 story in the wake of April’s sales releases:

Detroit’s Big Three is becoming Ford and the other two.

While its rivals stay afloat with billions in government aid, Ford grabbed a bigger slice of the American car market in April with record sales of its fuel-efficient Fusion.

Most of those gains (at Ford) came at the expense of General Motors and Chrysler, which unlike Ford are dependent on federal help.

Later in the report, the AP’s Kimberly S. Johnson and Dan Strumpf quoted an analyst who tied Ford’s success to Chrysler being in bankruptcy court and GM’s near-certain arrival there. Clearly those concerns were relevant, but the unmentioned scorn and resentment were already quite visible. An early June 2009 Rasmussen poll confirmed it: “The government bailout and takeover of General Motors remains very unpopular among the public. Just 26% of Americans believe the bailout was a good idea, and nearly as many support a boycott of GM products.”

The other instance of near recognition came in the eighth paragraph of an early November 2009 report (covered at NewsBusters; at Bizzyblog) about October’s sales results. In that item, Krisher and Dee-Ann Durbin wrote:

Ford Motor Co.’s sales rose 3 percent and it gained U.S. market share for the 12th time in 13 months as its critically acclaimed vehicles continue to grab buyers from rivals. Ford has benefited from consumer goodwill because it didn’t take government bailout money or go into bankruptcy protection, as General Motors and Chrysler did.

That’s fine, but it’s one thing to note that customers like the company that wasn’t bailed out. It’s quite another to assert that many resentful customers and potential customers abandoned GM and Chrysler because they were bailed out. Also, Ford wasn’t necessarily the only beneficiary of anti-GM and anti-Chrysler sentiment.

So why now? Why did the AP have to wait for GM Chairman Whitacre to say what he said before acknowledging what all of us already knew? Has the wire service seen protecting the company as part of its mission until now? If so, why?

Finally, Krisher cannot prove his claim in the opening excerpt that “the resentment will linger as long as taxpayers have a 61 percent stake in the company.” It’s very likely — I would suggest virtually certain — that the resentment will linger until the government sells its entire stake in the company. It’s also not unreasonable to believe that for some, especially those who remember how the government and the company “ripped off” unsecured bondholders during bankruptcy proceedings, the resentment will last a long, long time even if the government fully divests.

Cross-posted at NewsBusters.org.

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1 Comment

  1. A bit OT, but somewhat related: get this, Voinovich is saying a gas tax hike will help the job market!

    Yes, because we all remember how great the job market was when gas was nearly 4 dollars and nothing stimulates companies and peoples finances more than making them pay more for the basic fuel of everyday transportation. And nothing creates jobs better than higher taxes!

    Is the magnitude of the economic ignorance on the left not astounding?

    Oh, yes, but it will help close the deficit. Nothing liberals like better than punishing the taxpayers for the fed governments own irresponsibility. You’ve got a real winner there, Voiny.

    Comment by zf — August 8, 2010 @ 6:00 am

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