GM IPO seen as victory for Obama on auto bailout

By John Crawley and Caren Bohan

WASHINGTON (BestGrowthStock) – General Motors Co (GM.UL: ) standing on its own again in the capital markets would be a victory for President Barack Obama as he begins to trumpet auto bailouts as a policy success ahead of the November elections.

The U.S. Treasury is heavily involved in the mechanics of selling its 60 percent federal stake in GM and shedding the “Government Motors” label. But the White House says it has no role in the share offering expected to be unveiled next week and floated on Wall Street this fall.

Taxpayers are poised to become minority investors by recovering enough of the $43 billion still owed by GM in a first stock sale. That milestone could help Obama and Democrats push back against Republicans who have sought to characterize the 2009 bailouts of GM and Chrysler Group (FIA.MI: ) as government intervention in the private sector.

The public offering carries political risk for Obama if it disappoints. He authorized much of the $50 billion GM bailout and bankruptcy, and made taxpayers the largest shareholder in a risky market.

Republicans have put Democrats on the defensive ahead of the November 2 congressional elections over the $700 billion corporate bailout program partly used to help GM and Chrysler.

Bailouts of the financial and auto sectors — which began in President George W. Bush’s administration — have become a source of voter anger as Democrats worry about losing their congressional majorities.

Obama is defending his decisions on the auto rescue.

“That is something that you will hear him continue to talk about,” said White House spokesman Robert Gibbs.

In speeches and visits to U.S. auto plants in recent weeks, Obama countered criticism with a “made in America” message.

He touted the industry’s resurgence after its worst downturn as a hopeful sign for the economy. He called auto bailout critics “naysayers” and suggested they were out of touch with Americans struggling to find jobs and pay bills.

“An industry that was losing jobs is adding jobs,” Gibbs said. “An industry that wasn’t profitable is now profitable again. And communities and millions of jobs would be gone if we hadn’t taken the kind of action that the president took.”

GM and Ford Motor Co (F.N: ) are profitable, boosting exports, adding factory shifts and bringing models to market that embrace Obama’s economic agenda and his environmental and energy efficiency goals.

“I think it’s the best message they’ve got,” said Steven Schier, a political analyst at Carleton College in Minnesota.

Even smaller Chrysler, which received $15 billion in bailout and bankruptcy financing and is partly owned by the Treasury, is doing better and planning an initial public offering for 2011.

“Every day you need a new message to reinforce the broader message. In this case, it’s that the policies worked,” said Bruce Buchanan, a government professor at the University of Texas, Austin.

Steven Billet, a legislative affairs expert at George Washington University, said he suspects Obama would have been criticized had he allowed GM and Chrysler to fail. But he can tout a modest increase in jobs at a time when national unemployment hovers just under 10 percent.

“From a political standpoint, it’s probably a good thing to do and to take a positive position about their current state of affairs, especially since they seem to be recovering,” Billet said.

Motor vehicle and parts production are still among the largest of U.S. manufacturing industries even though they have lost nearly 175,000 jobs in two years. But the sector grew by 41,000 jobs to 704,000 between July 2009 and July 2010, according to Labor Department statistics.

Motor vehicle output overall in the United States was $314 billion of GDP in the second quarter compared with $223 billion in the year-ago period and $352 billion in the 2008 quarter, according to Commerce Department data.

Schier said action to stem auto job losses, especially in the Midwest, could help Democrats in gubernatorial and senate races in Ohio and Illinois.

Moreover, the United Auto Workers (UAW) health care trust for workers and retirees owns 17 percent of GM and stands to net billions of dollars in a public share sale. The cash boost would cover an important administration constituent on a signature administration issue — health coverage.

(Reporting by John Crawley and Caren Bohan. Editing by Robert MacMillan)

GM IPO seen as victory for Obama on auto bailout