How visible is the hand of Treasury in steering GM?

November 1, 2010

By Kevin Krolicki

“What we are not doing — what I have no interest in doing — is running GM.”  — President Barack Obama, June 2009.

GM/GM has undergone massive changes in the nearly year and a half since the Obama administration stepped in to save and restructure the company in bankruptcy to spare it from liquidation and to save hundreds of thousands of American jobs.

But how well has the White House done with its pledge to stay out of the management of GM after its $50 billion bailout?

A Reuters review of the record leading up to the GM initial public offering of stock expected later this month shows that the Treasury has called the shots on key aspects of the deal, including its speed, size, the fees paid to bankers and the involvement of sovereign wealth funds. You can read the special report here.

For a PDF version, click here.

Since publication, readers have written back with some interesting points about GM and its coming stock offering. To respond:

• Any consideration of former GM Chief Executive Ed Whitacre’s tenure should include that he was seen as empowering the “car guys” in a culture that had famously been dominated by “bean counters.” In late 2009, he tore up GM’s rambling mission statement in favor of something radically simpler: “Design, build and sell the world’s best vehicles.” Many in the company say that new mission statement – shorter than a haiku – was the most liberating thing to have happened at GM in years.

• The United Auto Workers union also played a role in bringing politics into the IPO process. In September, UAW President Bob King had launched a protest against JP Morgan Chase – one of the lead underwriters — because of their foreclosure practices and financing of the tobacco industry.

• It’s also true that the vehicles winning praise for GM in the market now – like the Chevy Cruze small car — were developed when former CEO Rick Wagoner was at the helm. The long lead times in the auto industry means that it won’t be almost mid-decade that product development decisions made in the immediate post-bankruptcy period start to turn up in GM showrooms.

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