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GM to buy back 200M shares as part of government exit

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The Treasury plans to sell its remaining stake in General Motors over the next 15 months, allowing the automaker to shed the stigma of being partly owned by the U.S. government.

GM said Wednesday it will spend $5.5 billion to buy back 200 million shares from the Treasury by the end of this year. The government, in turn, plans to sell its remaining stake of 300 million shares on the open market over the next 12 to 15 months.

GM will pay $27.50 for each share, about an 8-percent premium over Tuesday's closing price of $25.49. The shares shot up about 7 percent, to $27.30, in Wednesday morning trading.

The government is almost certain to lose billions on the $49.5 billion bailout that saved GM from being auctioned off in pieces during the financial crisis in 2008 and 2009. The Treasury says it will have recouped about $28.7 billion after GM completes its buyback. So, to break even, Treasury would have to sell the remaining 300 million shares for average of about $70 each.

GM says getting the government out of its business removes a major obstacle. Chief Financial Officer Dan Ammann told reporters that the company has market research showing that government ownership has held down sales of its cars and trucks.

"This is fundamentally good for the business," he said at a hastily called news conference Wednesday morning.

Almost immediately, GM will no longer be banned from owning a corporate jet or required to manufacture a certain percentage of GM cars and trucks in the U.S. GM says it already has exceeded the manufacturing requirements and will continue to do so for the foreseeable future. It has no immediate plans to buy or lease corporate jets.

Government-ordered pay restrictions will remain in effect until the Treasury completes the sale of its remaining 19 percent stake. Treasury said in a statement that the sale will be subject to market conditions.

If the government sells its remaining 300 million shares for $30 each, it would get another $9 billion. That means taxpayers would recoup around $38 billion, or about 77 percent of their investment. But they would still lose around $12 billion on the deal.

In 2008 and 2009, the Treasury bailed out GM to help stabilize and restructure the company. The bailouts of GM and Chrysler were part of the $700 billion Trouble Asset Relief Program created by Congress during the financial crisis in the fall of 2008.

"The auto industry rescue helped save more than a million jobs during a severe economic crisis," said Timothy Massad, Treasury's assistant secretary for financial stability. "The government should not be in the business of owning stakes in private companies for an indefinite period of time."

Massad said that exiting the GM investment "is consistent with our dual goals of winding down TARP as soon as practicable and protecting taxpayer interests."

Initially the government got 912 million shares in exchange for the money it lent GM. It sold 412 million shares for $33 apiece in GM's initial public stock offering in November 2010.

GM shares rose shortly after the IPO, but then slid as the U.S. economic recovery slowed and Europe's economy took a turn for the worse. As the shares fell, the government balked at further sales.

Although GM is paying a premium for the government shares, Ammann GM's other shareholders benefit because the number of shares on the market will be reduced about 11 percent. That should increase the value of the remaining shares.

The move was approved by the GM board on Tuesday evening after the company got opinions from its management and financial advisers, GM said.

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  • Balance Settlement
    You watch - our gov't will take a fleet of Chevy Volts instead.
  • Unsecured Debt
    The way this taxpayer sees it, the stock shares were just security for the loan. GM still should owe the remainder on the whole amount they were lent, plust fair market interest, fees, and expenses incurred by the gov't in handling this deal end-to-end. Selling off the stocks sets aside only part of the original debt. It should be no different than if your home is foreclosed or your GM car is reposessed. The lender sells the asset, and then collects from the borrower the difference, with all interest, fees, expenses added on, and it's not paid, they take a judgement and start seizing assets. Perhaps GM could settle the balance with a fleet of new DOT Plow Trucks.
  • Crooked Government
    "The government is almost certain to lose billions on the $49.5 billion bailout that saved GM from being auctioned off in pieces during the financial crisis in 2008 and 2009. The Treasury says it will have recouped about $28.7 billion after GM completes its buyback. So, to break even, Treasury would have to sell the remaining 300 million shares for average of about $70 each" Just another example of government investment and intervention gone awry at the expense of the taxpayer to reward the corrupt unions that got them in that shape in the first place. The unions turned around and spent millions of the taxpayer dollars on Obama's campaign. Its called money laundering and tax fraud but our corrupt government suborns this criminal activity by trading bailouts for votes. Now it will be the unions with the control of GM. I just bought a Ford and will never purchace another GM product as long as its controlled by the UAW and owes the taxpayers money.
  • The Banks Never Took A HAIRCUT!
    The irony of this story is that GM executives and employees all took a "haircut" in the bailout----but the US BANKS NEVER DID IN THEIR BAILOUT! Absolute crime. Plus the statute of limitations is running out and any illegal activity the banks did goes away like water under a bridge. Totally unfair. Where is the justice in this country anymore???
  • Terrible Investment
    Big loss on the taxpayers back. If GM and Chrysler would have gone under, Anyone in America could have gone out the next day and still purchased a car from a number of Manufacturers.......including American based Ford. Invest 49 Billion and get back 38 Billion.....what a joke. They should have gone through the normal Chapter 11 bankruptcy process that works for every other troubled business in the country. Certainly wouldn't want the Feds in charge of my 401K.....
  • A Reasonably Good Deal for Indiana
    This is an example of how the Federal government occasionally gets something right. An unstructured collapse of GM and Chrysler would have wreaked havoc on auto industry employment throughout the U.S., with an inordinate amount of that impact being in Indiana. If the U.S. loses $12 billion on the bailout, that is the cost of about 300 F-22's (per the GAO's March, 2012 estimate of $419M per plane). Lockheed Martin, the mfr. of the F-22, employs 123,000 people worldwide (less in the U.S.). The U.S. auto industry employs about 700,000 people. Would they all have been unemployed without the bailout? No, certainly not. But, you get the point. We have spent $12 billion on many things that have had a much less positive impact.

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