The Obama administration's pre-packaged bankruptcy plan for General Motors is a recipe for disaster. Even if President Obama were sincere in his claim that he doesn't want to run a car company, it will be impossible for him to eschew policies that distinctly benefit GM. With taxpayers on the hook for $50 billion (just for starters), the administration will do whatever it takes to demonstrate the wisdom of its intervention.
That will require, at a minimum, a positive return on the coerced investment. But to merely break even on taxpayers' 60% stake, GM will have to be worth $83 billion (60% of $83 billion is $50 billion). How and when will that ever happen? At its peak in 2000, GM's value (based on its market capitalization) stood at $60 billion. Thus, the minimum benchmark for "success" will require a 38% increase in GM's value from where it was in the heady days of 2000, when Americans were purchasing 16 million vehicles per year. U.S. demand projections for the next few years come in at around 10 million vehicles. Taxpayer ownership of GM is something we should all get used to, and the "investment" is only going to grow larger. Think Amtrak.