Skip to content

Bail With a Leaky Bucket

March 9, 2012

Hey, guess what?  The new General Motors appears to pretty much be as smart as the old General Motors.

Attention U.S. taxpayers:  You now own a piece of a French car company that is drowning in red ink.

That’s right.  In a move little noticed outside of the business pages, General Motors last week bought more than $400 million in shares of PSA Peugeot Citroen – a 7 percent stake in the company.

Because U.S. taxpayers still own roughly one-quarter of GM, they now own a piece of Peugeot.

GM has done this in the past.  I know that they still own a stake in Subaru, for instance.  This is probably done to have better influence over the auto parts that GM can then sell to Pugeot, since that portion of the business is still decent margin and somewhat healthy.  With that said, what the heck?  If GM thought it had some spare cash, maybe it could focus on growing the US auto business, or perhaps paying down its massive debt.  Nope.  It feels the need to expand overseas with a car company that doesn’t even sell inside the US.  Oh, and it’s being done in Europe, which we almost forgot is lighting itself on fire… maybe there’s a special provision in the funding that says Pugeot needs to sell more Citroens in Greece.

Ed Morrissey says it nicely:

So let’s get this straight.  As soon as GM got freed up a little from its own irrational production costs and could deal a little more effectively with its own labor rates, it took cash that it still owes taxpayers and sunk it into a car company whose problems in the exact same areas are as bad or worse as GM’s was before the bailout.  What a great investment!  Why, that sounds amazingly like the kind of investment expertise that cost taxpayers $535 million in Solyndra.

ABC’s Jonathan Karl notes that while GM bought a big stake in Peugeot, the Peugeot family had an opportunity to buy a stake in GM.  They passed on that “opportunity,” which just proves that the Peugeot family is smarter than GM.

Let’s be clear here.  As an independent company, GM has the right to invest wherever it wants and its shareholders have the right to flee when the decision is dumb.  However, GM still owes a fair amount of cash to you and to me, and that gives us the right as shareholders to complain and flee… oh, wait, we don’t own shares.  We just are owed money through a government proxy that probably patted the execs on the head when they decided to do this.

At least I know that GM isn’t going to change in the near future.  As I look to potential new vehicles, I would think that the GM trucks are a further notch down on my list.  At least they’re still higher than what’s left of Chrysler.

One Comment leave one →
  1. March 10, 2012 10:45 pm

    Oh gosh, taxpayer investment enterprise… I was listening to Larry Elderman personal finance show this morning, and — oh — he was all raves about the Treasury selling it’s AIG stock at 56 mil profit. 56 million. Yaaay! I’m sure once we figure in the inflation, it’s a loss.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: