At What Cost Did the U.S. Government Rescue GM?

NEW YORK (TheStreet) -- With General Motors (GM) set to release first-quarter 2014 results Thursday morning, it's time to ask whether GM was really saved by the Obama administration starting in 2009.

One must ask whether instead it merely won an expensive reprieve from the negative, forestalled effects of the restructuring of the global automotive industry.

Moreover, did unprecedented moves favoring GM inside the U.S. vs. other competitors end up compromising efforts to foster fair competition in key markets worldwide, while casting a pall over the integrity of U.S. capital markets?

Examining GM Performance vs. 2009 Base Case Projections

When professionals evaluate the success or failure of restructuring efforts such as those attempted with GM, they generally compare actual performance with estimates made at the time a given company was transformed.

The emergence of New GM from the bankrupt husk of Old GM occurred in a remarkably short period of 40 days between June 1, 2009 and July 10, 2009.

Unless they are buried in a filing I have not found, base-case financial and operating projections for New GM from July 10, 2009 forward have not been exposed to public scrutiny.

These projections, admittedly cobbled together in haste and under great pressure, are certainly material to any informed assessment of whether government efforts with GM succeeded.

Given passage of time and events, releasing information contained in the original projections cannot possibly harm New GM from a competitive standpoint. However, doing so would certainly set a proper context for judging the GM rescue attempt.

Taxpayers deserve to know what returns government leaders bargained for as they pieced together the opening capital structure of New GM.

Union members and retirees ought to know what their representatives traded for as they altered contract terms and work arrangements in exchange for ownership interests in New GM securities.

Those who care about simplifying the U.S. Tax Code deserve to know why parties shaping the historic transactions decided that the benefit of "tax loss carry-forwards" should flow to investors in New GM securities, rather than evaporate as was long-standing practice.

Instead of explaining how New GM did in the first quarter of 2014 compared to the first quarter of 2013, or in 2013 compared to 2012, management should make a full accounting for actual performance against original estimates.

Contrasting How the Federal Government Investigated Toyota and GM

Federal regulators and law enforcement personnel should ensure that manufacturers and dealers only sell vehicles in the U.S. that conform to reasonable safety standards.

Details now dribbling out from GM and from regulators already paint a disturbing picture going well back before 2009 of GM's attitudes towards assuring safety, about bad choices individuals made and about egregious lapses in the effectiveness of management and board level oversight.

For lesser offenses, Toyota (TM) suffered mightily starting early in 2010, just as New GM was struggling to mount a recovery.

Recently, Toyota entered into a deferred prosecution agreement and agreed to pay a $ 1.2 billion fine.

Those involved with restructuring GM assert that they knew nothing in 2009 concerning the faulty ignition switch safety issues that swirl now.

Yet how could no one have known enough about these issues affecting GM inside the federal government while they so actively investigated GM's toughest global competitor?

An unrefuted suggestion of unequal treatment under our laws creates a potent license to practice favoritism against American companies in key foreign markets.

Empowered Investigators Need to Re-Examine the Entire GM Timeline

Books have been written and a presidential election won asserting that General Motors was truly saved through extraordinary actions led by the Obama administration and chiefly financed by American taxpayers.

The timeline is complicated, and the accounting is complex, especially if we challenge investigators to consider more than what happened just with money invested to resurrect New GM.

However, the bottom-line result is simple to explain. Before Nov. 16, 2010, U.S. government officials embraced a plan to sell New GM securities on a basis where taxpayers ultimately failed to earn a fair and reasonable financial return on capital sums invested.

The public deserves to know much more than we presently do.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Charles Ortel is managing director of Newport Value Partners LLC, which provides independent investment research to professional investors.

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