Bob Lutz: Auto Bailout Was ‘Right Thing to Do’

Car Manufacturing
Car Manufacturing

Bailing out the U.S. automobile industry “was the right thing to do” despite declining share values over the past year, former General Motors Vice Chairman Bob Lutz said Monday.

“All of the automotive stocks are down. Many industrial stocks are down. Facebook is way up,” Lutz said on CNBC’s “The Kudlow Report,” adding that the company might be flying under many investors’ radar.

“The fact is, the investment community does not yet fully understand the value that’s residing in General Motors stock,” he said. “Ultimately, it will be recognized because the company is doing fabulously well in China, Latin America, the United States, record profitability. We’ve got a little problem to solve in Europe, but that’s on the way to solution.”

Lutz added that he was referring to “GM-controllable problems,” not the wider euro crisis.

In November 2010, General Motors pulled off the then-largest initial public offering in U.S. history, raising $20.1 billion with shares priced at $33.

On Monday, GM stock closed at $21.54 per share, roughly 30 percent lower than the IPO price.

“I can’t explain it,” Lutz said. “General Motors is in fantastic shape. … If you look at the fundamentals, the fundamentals are fantastic.”

On the issue of the federal bailout of the auto industry, Lutz argued it was a nonpartisan issue at this point.

“Now we even have Mitt Romney saying, ‘I was really in favor of the bailout, and I suggested it to Obama, and thank goodness he accepted my advice,’” he said.

Romney, the presumptive Republican presidential nominee, recently attempted to take credit for the auto industry’s success while on the campaign trail. The gambit came despite Romney having written a New York Times editorial in October 2008 titled, “Let Detroit Go Bankrupt.”

Lutz also said that he believed shareholders would see renewed strength in the stock.

“Any government in the world, conservative or social democrat, would’ve bailed out its auto industry because the alternative would’ve been absolutely catastrophic,” he said. “From a bipartisan standpoint, bailing out the two car companies, and with them all the suppliers, was the right thing to do.”

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