I firmly believe in the magic of the free market. However, President Obama does not. Our other USA car companies would have been stronger now if he let GM fail. Take a look at these two articles below:

Ford (F) Sales Up, General Motors’ (GM) Down in January

Chris Preston
February 1, 2012

Fresh off their best sales year since 2008, U.S. auto makers posted mixed results in the first month of 2012.

Ford Motor (NYSE: F), the largest publicly traded automaker by market capitalization, saw its U.S. sales increase 7.3% in January. General Motors (NYSE: GM), the second-largest publicly traded U.S. auto maker, reported a 6% decline in January sales from a year ago in part because of the deep discounts the company offered last month.

Despite GM’s year-over-year sale drop-off, its stock is up 1.9% in mid-day trading today. Ford’s stock, meanwhile, is up only 0.9% after its improved sales.

GM’s stock is likely benefitting from the good news about the auto industry as a whole today.  New-vehicle sales surged in the U.S. last month.

No automaker performed better than Chrysler, which is not a publicly traded company. Chrysler’s January sales improved 44% from the same month a year ago. Ironically, booming sales at the one privately-held auto maker among America’s “Big Three” are largely responsible for boosting GM’s publicly traded stock.

GM was the lone major U.S. auto maker to report a year-over-year sales decline last month. Slower sales of its big pickup trucks – Chevy Silverado sales were down 4.7%, GMC Sierra sales dropped 10.4% — were partly responsible for the decline. Cadillac sales were also down 29% from a year ago.

Ford, meanwhile, grew its sales thanks in part to increased interest in its Focus compact car. Overall, Ford expects sales growth of between 2% and 3% in the current quarter.

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Let’s Divest of GM Yesterday

Posted by Daniel Ikenson

Writing in today’s Washington Post, Charles Lane posits that the time is now for the U.S. Treasury to divest of its remaining 500 million shares of General Motors stock.  I agree with that conclusion, but not with Lane’s rationale or his recommendation for a heavy-handed, government-imposed exit strategy.

Just to recap: the Treasury recouped $23 billion of taxpayers’ $50 billion outlay when it sold GM shares to the public in an IPO in November 2010; the outstanding 500 million shares in government coffers must be sold at an average price of $54 to recover the remaining $27 billion; the IPO price was $33; today’s price is $21.69.  If all 500 million shares could be sold at today’s price, the Treasury would raise $10.8 billion, leaving taxpayers at a loss of just over $16 billion. (Of course, the sale of such a large number of shares would drive the average selling price way below today’s price, resulting in a much larger taxpayer loss.)

Lane is correct to conclude that GM’s immediate future isn’t looking quite so rosy. Demand is tanking in Europe. Concerns remain about whether GM will continue to be able to fund its $128 billion pension plan. And sales of the “game-changing” Chevy Volt have been lagging since the vehicle’s commercial introduction some 13 months ago—well before its engines demonstrated an annoying propensity to spontaneously combust. (Not to worry, says GM’s public relations team: the engines don’t seem to catch fire while being driven, only an hour or two after they’ve been parked in the garage.) Recognizing that that qualifier hasn’t been reassuring enough, GM is now offering to buy back any Chevy Volt it has ever sold, which doesn’t bode well for the bottom line, but also affirms how few of these Government Motors show pieces have even sold.

That grim analysis is the basis for Lane’s preference for government divestment now. There is more downside risk than upside potential. It is an argument based on market-timing, rather than on the principle that bad things happen when the government has a stake in the outcome of a race that it can influence. Sure, the administration would love to divest of GM at a profit to taxpayers. But the longer it is allowed to wait for that train to arrive, the greater the temptation to grease the skids.

The government should divest now. It should have divested in June, when it was first legally permissible to do so.  But the administration (following, by logic, what would have been Lane’s advice at the time) rolled the dice, expecting the stock value to rise. Instead it fell. And then there was this.

But my bigger problem is with Lane’s proposal for a managed divestment.  He writes:

It’s time to cut our losses.  Treasury should start selling its stake in GM.

And I know just the buyer: GM. The company is sitting on more than $33 billion in cash, about triple the market value of Treasury’s 500 million shares, which is roughly $10.8 billion.

Though GM wants to dedicate much of its cash to shoring up its pension plan, it could still absorb most or all of Treasury’s shares, even if Treasury charges a modest premium over the current market price, as it should.

Lane proposes this under the guise of some perverse fealty to a “free-enterprise economy,” as it would spare shareholders from the stock price-depressing impact of an unnatural 500 million share dump. But those shareholders knew the risks they were taking when they purchased GM stock in the first place. They certainly knew that the largest single shareholder didn’t intend to hold its position for very long. Lane’s argument for protecting those shareholders in the name of free-enterprise in unconvincing, if not misplaced.

Furthermore, Lane’s zeal for sticking it to GM seems to eclipse any real commitment to free markets. Forcing GM to divert resources from where management wants to commit them in order to achieve some favorable political outcome (a smaller taxpayer loss) is just as coercive as some of the administration’s actions on the road to GM’s nationalization in the first place.

GM should not be entitled to any favors or exceptional treatment by virtue of its ownership structure. To be certain of that, it should be 100 privatized yesterday. But likewise, GM should not be subject to compensatory or otherwise countervailing policies designed to punish or remove any perceived advantage. For starters, it is impossible to measure the benefits received or the penalties suffered with any precision. Demanding that GM not be exposed to special treatment goes in both directions.