DETROIT — General Motors posted its ninth consecutive profitable quarter on Thursday. But almost three years after its taxpayer bailout and bankruptcy, the nation’s biggest automaker still can’t shed the stigma of being “Government Motors.”
Because the Treasury Department still owns a 26 percent stake in the company, G.M. remains saddled with pay restrictions that limit its ability to recruit new talent, a ban on corporate jets, and lingering image problems in the eyes of some consumers, reported The New York Times.
Company executives usually deflect questions about the effect of government ownership on their business, or their frustration with it. But in a rare interview on the topic, G.M.’s chief executive, Daniel F. Akerson, said he longs for the day that G.M. can finally say goodbye to its biggest shareholder.
“I try not to let it bother me,” Mr. Akerson said. “But the fact is it does bother me.”
The farewell celebration won’t be happening anytime soon. Based on G.M.’s current stock price of $22.37, taxpayers would lose an estimated $15 billion if the government’s shares were sold today. Unless the stock rose quite significantly, the chances are slim that the Obama administration would sell its 500 million shares before the November election and invite criticism from Republicans about the wisdom of the auto industry bailout.
Mr. Akerson said he has regular conversations with Treasury officials, but has never gotten guidance on when they intend to divest. “I don’t know what the government’s plan is,” he said. “I think it would be helpful if they would publicly state it.”
After pumping in nearly $50 billion to save G.M., American taxpayers owned about 60 percent of the company when it emerged from Chapter 11 in the summer of 2009. The government sold the bulk of its holdings at $33 a share in the company’s public stock offering a year later.
But the administration is not eager to sell the rest at a loss. “As with all of our investments, we try to balance the goals of maximizing taxpayer recoveries and exiting as soon as practicable,” said Timothy G. Massad, the assistant Treasury secretary overseeing the Troubled Asset Relief Program. “We don’t have a specific timetable, but we’ll continue to watch the market closely.”
Like partners in a three-legged foot race, both the company and the government are hobbled by their connection. Unless G.M. improves its performance and gets the stock price up, the government can’t sell without losing billions. At the same time, uncertainty about the government’s stake worries some investors and hurts consumer perceptions of G.M. cars.
In a survey last quarter of 30,000 Americans shopping for new vehicles, 32 percent of those who rejected a G.M. model said they would not consider buying from the carmaker because of the bailout.
While that is down from 59 percent in 2009, “G.M. still has quite a hangover,” said Art Spinella, president of the firm that conducted the survey, CNW Marketing Research of Bandon, Ore. “That’s a significant number of people who will buy something else because of the bailout.”
Chrysler, the other Detroit automaker to receive government aid, fared better in the most recent survey. The company paid off its federal loans last year, and just 22 percent of shoppers said they had avoided a Chrysler product because of the bailout.
Mr. Akerson said the negative feelings about G.M. were an unfortunate byproduct of the past struggles that led the company to seek government assistance.
“All we can do is put numbers on the board and hope people start to believe in our story,” he said.
Government ownership is also affecting G.M. internally. Mr. Akerson said the company has lost a half-dozen candidates for management jobs because of salary restrictions on companies getting TARP financing. G.M.’s search for a new head of human resources lasted months because several promising contenders balked at the uncertain time frame for the government’s exit.
The government’s ban on corporate aircraft is mostly a matter of inconvenience for Mr. Akerson and his senior staff members. He was stuck in a Paris airport for five hours last year after missing a connecting flight to China, and often spends an entire day traveling to remote factories for visits that last two or three hours.
“It is part of the deal,” Mr. Akerson said. “There’s no use complaining about it.”
He was more troubled by how G.M. had become, in his words, “a political football.” He still seethes about being called to testify before Congress in January about the safety of the Chevrolet Volt, which experienced battery fires after government crash tests. “I think the whole thing was politically driven,” he said.
Mr. Akerson also said he believed that politics were affecting the government’s decision to hang on to its G.M. stock. President Obama has been pointing to the turnaround at G.M. as a bright spot in the nation’s economy. But if Washington were to sell G.M. shares at a loss, the comeback story would be eclipsed by the cost to taxpayers for its rescue, he said.
“That’s why I don’t think they are going to sell in an election year,” Mr. Akerson said. “Right now, this is a positive for the current administration. If they sell it this year and don’t get all the money back, it’s not a positive.”
The presumed Republican presidential nominee, former Massachusetts Gov. Mitt Romney, said in a Feb. 14 opinion article in The Detroit News that the Obama administration needed to “act now to divest itself of its ownership position in G.M.” But in the same article, he said the shares should be “sold in a responsible fashion,” without elaborating.
G.M. is not the only automaker with a lagging stock price. Shares in Ford, which weathered the recession without a bailout, have dropped almost as much as G.M.’s in the last year because of increased competition in the domestic auto market and economic troubles in Europe.
Still, if G.M. improved its sales and earnings, its share price might rise and hasten the government’s exit.
The company said Thursday that it earned $1 billion in the first quarter, a 69 percent decline from the year-ago period, when it benefited from one-time gains from asset sales.
Its earnings in North America improved 30 percent during the quarter, but continued struggles in Europe dragged down overall results. While the company is introducing 20 new models worldwide this year, industry analysts say G.M. has yet to match Ford’s pace in globalizing vehicle platforms to save money on product development, parts and manufacturing costs.
“It’s important for people to realize that they are not done transforming themselves,” said David Whiston, an analyst with the Morningstar investment firm. “It is going to take more time to right the ship.”
The skepticism is not lost on Mr. Akerson, a former executive with the Carlyle Group private equity firm who took over as G.M.’s chief in mid-2010.
“We have a good company,” he said. “It’s our job to make it great again. We know we have a lot of work to do.”
Losing the distinction of Government Motors could help it get there faster. “But we’re in a situation we can’t control,” Mr. Akerson said. “So we have to wait.”
