GM May Have To Sell China Unit To Get Taxpayers Back Their Money

The Administration says it wants a “quick exit” from its investment in GM. The taxpayers should not have to own a US auto company any longer than they have to. The problem is that, by most estimates, GM would have to have a market value of $50 billion for the government to recoup its money. That is not likely to happen while GM waits for the US vehicle market to recover.

The federal government could get a great deal of its cash back if GM sold its operations in China.

According to Dow Jones, “General Motors Corp.  said Wednesday its first-half sales in China rose 38% to a record 814,442 units.” That is not as many cars as it sells in America, but US sales are shrinking at about the rate that they are growing in the world’s most populous nation.  Many analysts expect that total vehicles sales for all car companies in China will top those in the US for the first time ever in 2009.

GM says it can double Chinese sales in five years, which would take its total to over two million. That would make the unit worth tens of billions of dollars if the prices of much less successful companies like Jaguar and Saab that have been sold in the last year are any indication.

The Treasury ought to be telling GM that it will have to survive based on whether or not its new balance sheet and lower-cost American operations can support the firm. China should belong to taxpayers. It is their only chance to exit their investment in GM whole.

Douglas A. McIntyre