If you've only been paying casual attention to the problems General Motors is wrestling with at Opel, this might make you sit up and pay attention.
Writing in Forbes, Joann Muller says the loans GM has made to Opel have actually come from taxpayer dollars. That means American money essentially is keeping a German carmaker afloat — something the German government refused to do.
Here's the background. In 2009, GM had found a buyer for Opel. It was going to sell a controlling interest to a group let by Canada's Magna, and Germany was going to spend $6 billion to finance it. But GM's board decided after the company emerged from bankruptcy that Opel was too strategic to sell. It asked European governments to pitch in so GM could fix the place.
But it's hard to sell other governments on a turnaround plan when they've just seen your government pony up billions of dollars. They said no. So, in September 2010, GM wound up providing $4.2 billion of its own money for Opel's "restructuring and ongoing needs."
This is the gray area. The step occurred after GM had paid back the $6.7 billion that Treasury considered a loan, but before GM went public. At that point in time, GM was still a private company in which the government held a majority stake. It wasn't under public scrutiny, as it would be in November 2010 when it issued stock once more.
Now, nobody at GM hid the transaction: it was revealed in Securities and Exchange Commission filings. But it was pretty much forgotten until this week, when Morgan Stanley's London analyst Adam Jonas asked about the status of the loan during GM's earnings conference call. Here's the exchange between Jonas and GM's CFO Dan Ammann.
Jonas: Okay. Just one final question on Europe if I may. Can you tell us the size of the intercompany loan from GM to Opel, please?
Ammann: We don't comment on our intercompany funding arrangements anywhere in the company, including with respect to the European business.
Jonas: Would you comment on — if you don't comment on the amount of it, could you comment directionally on is that loan increasing or is it stable?
Ammann: I'd say the only thing I'd say at this point in time is that across the company, as a general matter, cash flow tends to track profitability.
In other words, GM doesn't want to talk about whether Opel has drawn all $4.2 billion, whether it has made more available or what the total cost of propping it up has been. Forbes notes that GM went public in 2010 at close to $34 a share. These days, it's trading at closer to $20. At that price, the 500 million shares that the Treasury still owns are worth $10 billion.
Plus, taxpayers, at least indirectly, have a stake in the outcome at Opel. What would you like for a souvenir?
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