Unless you've been living under a rock, you've probably heard by now that General Motors is going public (again) -- or more specifically, that the U.S. government and other GM stakeholders are preparing to sell some of their holdings in the open market.
Some of their holdings.
Speaking to reporters on Thursday, General Motors CEO Dan Akerson confirmed what many had suspected: It'll be a couple of years -- at least -- before the government sells all of its 60.8% stake in the automaker it spent $50 billion bailing out last year.
In other words, American citizens, don't expect to get paid back anytime soon.
Is this an outrage?
It's certainly easy to get mad at GM -- the company, once one of America's industrial crown jewels, was (in retrospect) shockingly mismanaged for decades before skidding into bankruptcy court as a pile of smoldering wreckage last year. While GM is hardly the only old-line U.S. company to face a hard reckoning -- big names from Delta Air Lines to Pacific Gas & Electric have had their own trips through bankruptcy courts in recent years -- it is unique in that it received a very big, and very unpopular, government bailout.
That bailout, of course, was part of an unprecedented high-speed restructuring process that saw labor unions favored over bondholders, leading some (OK, lots) of people to accuse the Obama administration of discarding hundreds of years of legal precedent to reward a favored political constituency.
So yeah, you might say there are some hard feelings here. And those feelings were stoked in April when then-CEO Ed Whitacre made a big show of having "paid the government back" -- after returning a mere $6.7 billion of the $50 billion bailout.
That was certainly a lousy PR move, in retrospect. But here's the thing: Technically speaking, Whitacre was right. The GM stock held by the government, plus that $6.7 billion, technically constitutes full repayment of the bailout money.
But technicalities won't let GM off the hook. And unlike certain past executives, GM's current leaders aren't fools. They know that.
The IPO won't pay us back
Every auto analyst on Wall Street has run the numbers, and while the specifics of their results differ, it's pretty clear that the government's 60.8% stake in GM isn't going to be worth the $43.3 billion GM has to pay back.
At least, not yet.
This is why the government's sell-off will likely take a few years: As the world's economies improve, as global auto sales get back to pre-crash levels, as GM itself continues to invest in and upgrade its product line, GM's value should go up. Waiting to sell the bulk of its holdings should (we hope) help the government get closer to breaking even.
Closer to breaking even. Actually breaking even would require GM to have a market cap a bit north of $70 billion, by my back-of-the-virtual-envelope calculations. For comparison, Ford's (NYSE: F ) market cap is around $43 billion, and Honda's (NYSE: HMC ) is about $63 billion ... and Ford's profits are outpacing GM's at the moment, though Ford still carries a heavy debt burden. On the other hand, Toyota's (NYSE: TM ) market cap is about $112 billion, and given GM's Toyota-like global sales levels and low post-bankruptcy debt overhang, that may be a better comparison.
But on the other hand, that's Toyota, whose credit rating and sustainability are, shall we say, not really in doubt. And for all the damage Toyota's brand has taken over the last year's recall kerfuffle, it's not really comparable to the damage GM's brands like Chevrolet have taken since GM started its long, slow power-slide into product oblivion in, oh, 1980 or so.
Long story short, if GM can manage a Ford-like turnaround, it's entirely plausible that the company might someday be worth a premium to what the government "paid" for its shares ... but today is not that day.
But in terms of paying back the U.S. taxpayers, I'm not sure that matters.
Why we'll probably get paid back ... eventually
Here's the bottom line, as I see it: Just as Ford still has to pay back $20-billion-plus of the private loans that paved the way for its spectacular turnaround, GM is morally -- if not legally -- obliged to pay back the remaining $43 billion it owes the U.S. government (and several billion more owed to the government of Canada).
GM's new CEO Dan Akerson is a former U.S. naval officer with what appears to be a keen sense of patriotic duty. And that, combined with GM's fervent desire to be done with this whole "Government Motors" business once and for all, is why I think GM's current management will see that the government gets paid back, one way or another, even if it takes several years -- and even if it requires some kind of additional payment after all of the government's stock is sold.
Sure, it might be expensive. But I don't think they can afford not to.
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Fool contributor John Rosevear thinks the Chevy Citation was the car that sealed GM's downfall, but invites dissenting opinions from readers. He owns shares of Ford, which is a Motley Fool Stock Advisor selection. The Motley Fool has a disclosure policy.