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Auto Bailout Legacy: GM's European NightmareSubmitted by Mark Modica on Thu, 08/16/2012 - 10:31 Printer-friendly/Email to friendThree years into their forced marriage with GM, the American taxpayers have seen the value of their investment in GM deteriorate by approximately $24 billion, largely due to continuing European losses. Exposure in Europe has contributed to crushing the value of GM's stock due to its chaotic and failing Opel unit in Germany. While government, journalists and Wall Street sympathizers have given the Obama Administration and GM leadership an almost incomprehensible pass on this value destruction and massive loss (presumably due to the macro-economic nature of the crisis), it's time to call for the accountability that this new Board was supposedly going to deliver. Overlooked is the value-destroying, cash-sucking disaster that is GM Europe was packaged and ready for sale to new European buyers in 2009 before the new Obama GM Board of Directors slammed the brakes on the deal, throwing GM into its current value free-fall. In fact, the decision to not sell the Opel operations (which has not been profitable for more than a decade) in 2009 after GM cleared bankruptcy was the very first major decision of the new Obama Board. Had Opel been sold, GM stock would be much higher than it is today. In November of 2009, the governments of Russia, Germany and the US were engaged in a major international deal that would have seen the global auto parts manufacturer Magna purchasing a majority portion of GM's failing Opel unit through a combination of public and private funding coming from Russia and Germany. Then interim GM CEO Fritz Henderson made the controversial decision to simply sell the unit off. The cost of fixing Opel and ridding the company of the over-capacity was a task that would cost into the tens of billions of dollars, if it were possible at all due to the legal and political obstacles in the way. But the "new and improved" Obama Board of Directors, working mostly at the persistent lobbying and urging of the UAW's appointee, Steve Girsky (in photo), were naively convinced that Opel was simply a rough jewel in need of some new leadership (Opel fired its third leader in as many years a few weeks ago) and TLC from the brain-trust in Detroit. With his persuasive lobbying, the union's man Girsky convinced all but two of the Board members to vote to ditch the planned sale and hold onto this "gem" that has now contributed to the loss of about $24 billion of the American taxpayers' forced investment. Beyond the sheer magnitude of the value losses, fixing Europe has become an all-consuming distraction that is draining GM of vital and scarce resources. This became evident on last quarter's earnings conference call, where CFO Dan Amman ducked and weaved in answering how much of the American taxpayers' money was being lent to Opel to sustain its failing operations. And as if the misdeeds and mistakes couldn't get worse, GM tied itself up in an equity alliance with the only other automaker in the region in as bad or worse shape than Opel, Peugeot. GM just made the shocking admission with an SEC filing that it will likely have to write-down the investment as a loss since Peugeot's stock price has also fallen off a cliff with little or no hope of recovery. How's that new and improved government leadership and accountability working for you now?
