Republicans introduced legislation this week that would amend the Constitution to prevent the government from owning stock in a private company.
The bill, introduced by Rep. Michael Turner (R-Ohio), is aimed at preventing a repeat of the bailouts of automakers and financial institutions that has left the U.S. owning troubled companies.
Few in the administration or in Congress want to see the government become a stakeholder again in any company. But a number of signs suggest the government’s intervention in the private sector were a success, even with companies that were seen as long-shots for survival.
The big companies the government owned stakes in are all emerging from the financial crisis looking as if they will live on, and the Treasury Department could still earn a profit on much of its investment.
Treasury has earned $12 billion on the Citigroup bailout, and might have made a profit off its stake in General Motors if it had waited to sell more of its shares until after the company’s stock price rose. Reports indicate the government may even make a profit off its stake in AIG as it sells its shares over the next few years.
Yet it is Chrysler, the auto company battling for survival since the Reagan era, that might be the best argument in favor of the bailout.
The smallest of the Big Three U.S. automakers appears poised for a comeback less than two years after the government saved it from extinction.
Chrysler made a $569 million net profit last year and has $10 billion in hand. It is adding jobs in the U.S. and slowly countering impressions in Washington and elsewhere that it can’t survive.
“Over the course of the last 12 months, we’ve raised our outlook significantly,” said George Magliano, senior auto analyst for IHS Global Insight. “Their whole tone has changed over the last six to eight months.”
Turner’s legislation would add an amendment to the Constitution to ensure the government could never again trade Treasury dollars for company stock. His bill states that the U.S. “shall not own, subscribe to, or otherwise have any interest in the stock or equity of any company, association or corporation.” It states that the prohibition would not apply to investments through pension funds.
In an interview with The Hill’s Floor Action blog, which first reported the proposal, Turner stressed that the amendment would not prevent the government from helping distressed companies, but would prevent the government from taking ownership in them.
Turner, whose father was a longtime GM employee who lost his health insurance benefits in GM’s restructuring, told The Hill it is wrong to have the federal government “owning companies and making decisions about winners and losers.”
Chrysler has seen nine straight months of year-over-year sales increases, and is tackling its reputation of not introducing new models by bringing 16 new vehicles to the market.
This includes the tiny Fiat 500, on display at this week’s Washington Auto Show. It’s the first vehicle to emerge from the new Chrysler-Fiat partnership and the first Fiat to hit the U.S. in nearly three decades. The car represents an important gambit by Chrysler, which wants to show it can compete in the small-car market.
Sergio Marchionne is the new CEO of the combined Chrysler and Fiat, which holds a 20 percent stake in Chrysler that it may increase to 35 percent later this year.
Chrysler still owes billions to the U.S. and Canadian governments, and the U.S. retains a 9 percent stake in the company, but Marchionne has talked of paying the governments back by the end of the year.
“I’d like to pay them off in 2011, if I could,” Marchionne told reporters earlier this month. “I would like to get it done as quickly as I could.”
To be sure, the future is not all roses for the company — Magliano notes that while Chrysler’s financial position has improved, the progress “hasn’t really show up in sales.”
Both Chrysler and GM also suffer from taking the bailout money. “A lot of people won’t go into a Chrysler or GM showroom because they took the government payout,” said Magliano.
Still, Chrysler argues the bailout has allowed it to restructure and given it an opportunity to be reborn.
Ian Swanson is the news editor at The Hill.