Too Early to Bail Out?

General Motors, which hit rock bottom in early 2009, was bailed out at the taxpayer’s expense for roughly $50 billion. In august, GM showed $1.3 billion in profit for last quarter, their best since 2004. And This week, with a new CEO in place, they have filed for their IPO, reentering an already volatile market.  It has not been said what portion of the company will hit the market, but with a $50 billion dollar debt to pay off, it should be a significant amount. 

The U.S. Government currently owns 61% stake in the company. The political tie has dissuaded potential GM product buyers, but plans to go public certainly open opportunities for investors and product purchasers, especially foreign investors, who are expected to snap up large shares of initial offerings for a low price.

We will see what the future holds for GM as it hits the market later this year/early 2011.  Their recent profits look promising, but nothing is certain. The government a intends to keep smaller stake in the company than it currently holds, as to make the best possible return on investment. But if profits are predicted to rise, why pull out now? Sure, taxpayers’ money will be protected, but as for GM financial security, nothing is certain once they enter the market, no longer padded by federal funds.  A flood of foreign dollars into one of the U.S.’s largest production giants may be just what GM and the country need, but only time will tell.

Jack Lambrecht