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Government sells remaining stake in General Motors

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The U.S. government ended up losing $10.5 billion on the General Motors bailout, but it says the alternative would have been far worse.

The Treasury Department sold its final shares of the Detroit auto giant on Monday, recovering $39 billion of the $49.5 billion it spent to save the dying automaker at the height of the financial crisis five years ago.

Without the bailout, the country would have lost more than 1 million jobs, and the economy could have slipped from recession into a depression, Treasury Secretary Jacob Lew said on a conference call with reporters.

"The economic stakes were high, and President Obama understood that inaction was not an option," Lew said. "His decision to commit additional support to GM while requiring them to fundamentally restructure their business was tough but it was right."

The government received 912 million GM shares, or a 60.8 percent stake, in exchange for the bailout in 2008 and 2009. It began selling shares once GM went public again in November of 2010, and the pace picked up this year as the stock rose more than 40 percent. Last month, the government said it expected to sell the remaining 2 percent stake by the end of the year.

GM shares rose 73 cents, or 1.8 percent in after-hours trading following the announcement. They rose 1.8 percent in regular trading, at one point reaching $41.17, the highest level since GM's 2010 initial public offering.

Earlier Monday, Mark Reuss, GM's North American president, told reporters in Warren, Mich., that a government exit would boost sales, especially among pickup truck buyers. GM has said repeatedly that some potential customers have stayed away from its brands because they object to the government intervening in a private company's finances. Because of the bailout, GM had been tagged with the derisive nickname "Government Motors."

During the conference call, treasury officials shrugged off a question about whether GM should have been required to pay more because it has a large cash stockpile, saying that the bulk of the bailout money was converted to GM stock. Not doing the bailout would have cost the government more than it lost in missed tax revenue and payments for unemployment benefits and pensions, the officials said.

The company now is sitting on $26.8 billion in cash and is considering restoration of a dividend.

GM went through bankruptcy protection in 2009 and was cleansed of most of its huge debt, while stockholders lost their investments. Since leaving bankruptcy, 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 auto bailout was part of the Troubled Asset Relief Program, with the bulk of the money going to financial institutions. Treasury said it spent $421.8 billion on bailouts and so far has recovered $432.7 billion including the loss on GM.

The Center for Automotive Research, an Ann Arbor, Mich., think tank, issued an updated report on Monday saying that if the government hadn't intervened and GM went out of business, nearly 1.9 million jobs would have been lost in 2009 and 2010. Federal and state governments also would have lost $39.4 billion in tax revenue and payments made for unemployment benefits and food stamps, the study said.

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  • Keynsian Economics
    Proving once again that government interventions in the economy during a time of financial crisis can have a huge positive impact for all tax payers.
  • GM Liberal Math?
    I cannot make the numbers work. I think taxpayers spent/lost more than $10.5 Billion plus the pensions are now guaranteed. If we sold all 912 million shares today at $41.17, the highest price since GM went public in 2010, that only raises $37.5 Billion, or a loss of $12 Billion. Instead of waiting to sell until the price was higher, they sold most below this price. We lost like $15 Billion or more. Sounds like liberal math to me. The US is bankrupt and only fiscal conservatives see it. We have no money for war, bailouts, illegals, or Obamacare. The sooner voters get it, the better.
  • Boycott GM
    Taxpayers are out $10.5 billion and GM has $26.8 billion in cash sitting around. This is theft, all facilitated by the federal government. I will never, ever buy a GM vehicle.

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    1. Cramer agrees...says don't buy it and sell it if you own it! Their "pay to play" cost is this issue. As long as they charge customers, they never will attain the critical mass needed to be a successful on company...Jim Cramer quote.

    2. My responses to some of the comments would include the following: 1. Our offer which included the forgiveness of debt (this is an immediate forgiveness and is not "spread over many years")represents debt that due to a reduction of interest rates in the economy arguably represents consideration together with the cash component of our offer that exceeds the $2.1 million apparently offered by another party. 2. The previous $2.1 million cash offer that was turned down by the CRC would have netted the CRC substantially less than $2.1 million. As a result even in hindsight the CRC was wise in turning down that offer. 3. With regard to "concerned Carmelite's" discussion of the previous financing Pedcor gave up $16.5 million in City debt in addition to the conveyance of the garage (appraised at $13 million)in exchange for the $22.5 million cash and debt obligations. The local media never discussed the $16.5 million in debt that we gave up which would show that we gave $29.5 million in value for the $23.5 million. 4.Pedcor would have been much happier if Brian was still operating his Deli and only made this offer as we believe that we can redevelop the building into something that will be better for the City and City Center where both Pedcor the citizens of Carmel have a large investment. Bruce Cordingley, President, Pedcor

    3. I've been looking for news on Corner Bakery, too, but there doesn't seem to be any info out there. I prefer them over Panera and Paradise so can't wait to see where they'll be!

    4. WGN actually is two channels: 1. WGN Chicago, seen only in Chicago (and parts of Canada) - this station is one of the flagship CW affiliates. 2. WGN America - a nationwide cable channel that doesn't carry any CW programming, and doesn't have local affiliates. (In addition, as WGN is owned by Tribune, just like WTTV, WTTK, and WXIN, I can't imagine they would do anything to help WISH.) In Indianapolis, CW programming is already seen on WTTV 4 and WTTK 29, and when CBS takes over those stations' main channels, the CW will move to a sub channel, such as 4.2 or 4.3 and 29.2 or 29.3. TBS is only a cable channel these days and does not affiliate with local stations. WISH could move the MyNetwork affiliation from WNDY 23 to WISH 8, but I am beginning to think they may prefer to put together their own lineup of syndicated programming instead. While much of it would be "reruns" from broadcast or cable, that's pretty much what the MyNetwork does these days anyway. So since WISH has the choice, they may want to customize their lineup by choosing programs that they feel will garner better ratings in this market.

    5. The Pedcor debt is from the CRC paying ~$23M for the Pedcor's parking garage at City Center that is apprased at $13M. Why did we pay over the top money for a private businesses parking? What did we get out of it? Pedcor got free parking for their apartment and business tenants. Pedcor now gets another building for free that taxpayers have ~$3M tied up in. This is NOT a win win for taxpayers. It is just a win for Pedcor who contributes heavily to the Friends of Jim Brainard. The campaign reports are on the Hamilton County website. http://www2.hamiltoncounty.in.gov/publicdocs/Campaign%20Finance%20Images/defaultfiles.asp?ARG1=Campaign Finance Images&ARG2=/Brainard, Jim

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