Obama & auto Companies

President Obama shakes hands with General Motors President Fritz Henderson in the Rose Garden on May 19. Based on the latest bankruptcy and bailout plans, the government will hold 72.5% of GM.

Based on the latest bankruptcy and bailout plans, the government will hold 72.5% of General Motors Corp., 8% of Chrysler Corp. and 35% or more of GMAC Financial Services, the car loan business. Ideas for what to do with those shares are colored by politics and investment philosophies, and they're sure to be debated. Some economists and financiers believe Obama should dump the stock almost immediately, to whatever buyer the government can find. Others say the administration should find a partner, maybe a savvy investor such as Warren Buffett or an justice firm such as Oaktree Capital to operate the businesses for a generous share of any profits on the condition that the government gets its money first. And some believe President Obama should just stick the shares deep into a desk drawer and let the next president worry about an exit strategy. GM and Chrysler will either fail again or become corporate home runs. Only time will tell. The government has sunk so much money into the companies that a few billion dollars more will make little difference, especially compared with the potential for GM and Chrysler to become corporate contributors to the U.S. economy once they've been "freed" from what Mitchell (an economist) considers the inefficient stain of federal ownership. It is believed that it is a Catch-22 and its not good to sell stock at a loss, but there is no way for the stock to go up as long as the government is involved. They need to get these companies back into the private sector, otherwise these companies will be perennial bleeding sores for the U.S. taxpayers.