Monday, March 10, 2014
By Tom Krisher
The Associated Press
DETROIT — The U.S. government expects to sell the last of its stake in General Motors by the end of the year, bringing an end to a sad chapter in the 105-year-old auto giant’s history.
In this Monday, Jan. 28, 2013 file photo, cars move along an assembly line at the General Motors Fairfax plant in Kansas City, Kan. The U.S. government expects to sell the last of its stake in General Motors by the end of 2013, bringing an end to a sad chapter in the 105-year-old auto giantís history.
AP Photo/Orlin Wagner
This photo shows the production line of the General Motors 3.6-liter, 302 horsepower (224 kW) V6 engine at GM’s Flint Engine on Wednesday, Nov. 20, 2013, in Flint, Mich.
AP Photo/The Flint Journal, Jake May
The Treasury Department, in a statement issued Thursday, said it still owns 31.1 million shares of the auto giant, less than 2 percent. It plans to sell them by Dec. 31, as long as the price holds up.
Shares of GM briefly hit $39 in trading early Thursday. They pulled back a bit by midday, but still were up 76 cents, or 2 percent, to $38.45. The shares have gained 34 percent this year.
The government received 912 million shares in exchange for a $49.5 billion bailout during the financial crisis in 2008 and 2009. So far it has recovered $38.4 billion of the money, but selling the remaining shares at Wednesday’s $37.69 closing price gets the government $1.17 billion, leaving taxpayers short by roughly $10 billion.
The government says the bailouts of GM and Chrysler were needed five years ago to save the American auto industry and more than a million jobs. It never expected to get all of the money back.
“Had we not acted to support the automotive industry, the cost to the country would have been substantial — in terms of lost jobs, lost tax revenue, reduced economic production and other consequences,” Deputy Assistant Treasury Secretary Tim Bowler said in the statement.
The lack of government ownership should boost GM’s car and truck sales, North American President Mark Reuss said Wednesday at the Los Angeles Auto Show. GM was tagged with the derisive moniker “Government Motors,” and, at least initially, taking aid from the taxpayers kept some buyers away from GM vehicles. But company research later showed that subsided.
Taxpayers’ initially got a 61 percent stake in GM in exchange for the bailout, which was needed because GM nearly ran out of cash and may have faced liquidation. Treasury gradually has sold off its stake since a November 2010 initial public offering. The Canadian government, which also took part in the bailout, still owns about 8 percent of GM stock.
Once the U.S. government exits, GM will be free of restrictions on executive pay that came with the bailout. CEO Dan Akerson has complained that the restrictions have hurt GM’s ability to recruit executives.
GM went through bankruptcy protection and was cleansed of most of its huge debt, while stockholders lost their investments. Since leaving bankruptcy in 2009, GM has been profitable for 15 straight quarters, racking up almost $20 billion in net income on strong new products and rising sales in North America and China. It also has invested $8.8 billion in U.S. facilities and has added about 3,000 workers, bringing U.S. employment to 80,000.
The company now is sitting on $26.8 billion in cash and is considering restoration of a dividend. It hasn’t paid U.S. federal income taxes since leaving bankruptcy due to write-offs from accumulated net losses.
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General Motors’ Shop Chairman at Local 651 Loyd Hargis , Jr., left, and Terri Burden, Flint Engine plant manager, unveil a 3.6-liter, 302 horsepower (224 kW) V6 engine, which is being produced at GM’s Flint Engine on Wednesday, Nov. 20, 2013, in Flint, Mich.
AP Photo/The Flint Journal, Jake May