Buy GM? Fat Chance

April 27, 2010 at 9:03 pm · Filed under Uncategorized

Recently General Motors CEO Ed Whitacre has come out and referenced to the National and International television viewing public that his company has recently paid back the U.S. and Canadian goverments the bailout money they were given in full, with interest, years ahead of schedule.

Small little problem.  He’s only referring to the 7 Billion in pure loans they were given and not the full 49.5 Billion that they were actually given.  The balance of nearly 43 Billion was given to GM for a combined 60% equity stake in the company by both governments.  Check out the commercial for yourself below.

My guess is that GM is going to try and repay the debt to the government when their stocks go on sale again, probably later this year.  There is a very slim chance that the market cap rate will be set high enough to actually meet that $43 Billion figure.  They would have to be sitting a few dollars higher than Ford (approx $13) to give them the ability to pay back that entire loan in full.  I just don’t see that happening.

What do you all think? Are you buying Government Motors at $20? $18, $17, $16?  We got in on Ford when times were tough and they’ve come back quite a bit, but they don’t burn through cash quite like GM does and their revenues have actually been higher as of late.  This would be tough for me to persuade the family.

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