Source: USA TODAY
U.S. taxpayers no longer own any of automaker General Motors. The Treasury sold the last of its remaining 31.1 million GM shares today. It started with 500 million shares in 2010.
The taxpayer loss on the GM bailout is $10.5 billion. The Treasury department said it recovered $39 billion from selling its GM stake, and had put $49.5 billion of taxpayer money directly into the GM bailout.
The total bailout rises to $51 billion, including another $1.5 billion that Treasury put into programs to keep GM suppliers afloat and to make sure owners’ warranties were honored, plus some into the old GMAC finance company that’s now known as Ally — separate from a much larger Ally bailout.
That $1.5 billion didn’t go directly to GM, but was spent largely on its behalf.
GM shares closed today at a record $40.90, up 73 cents or 1.8%. The Treasury announcement came after markets closed, and the impending exit, which Treasury has said would come by the end of the year, might have nothing to do with the advancing share price. “People have been factoring this in for awhile,” GM CFO Daniel Ammann said today in an interview.
What has been happening more recently is that Wall Street analysts have been talking up GM’s stock. Ryan Brinkman at JPMorgan, for example, has said his price target for the shares is $52.
Also, investors have been speculating that after the government’s exit, GM would begin a dividend payment on the shares. GM hasn’t said whether it will.
A statement from CEO Dan Akerson today played down the final sale of shares. “The U.S. Treasury’s ownership exit closes just one chapter in GM’s ongoing turnaround story. We will always be grateful for the second chance extended to us, and we are doing our best to make the most of it.”
Ammann said, “I don’t think there’s anything fundamental that changes” at GM. He said that there has been “no operating involvement” from the Treasury. “We have been running the business for all the shareholders.”
What the end of government ownership does mean for GM:
• The automaker can pay its executives whatever it wants. While Treasury owned shares, the pay of GM’s top brass has been capped at a percentage of what other companies are paying. Akerson has said the pay cap made it hard to recruit the best talent.
• GM now should escape some, but not all, of the “government motors” slur flung at it by opponents of government ownership in private companies.
“GM will always be ‘Government Motors’ to the small segment of America that’s still upset over the bailout. But those people likely weren’t going to be GM buyers anyway,” says Jessica Caldwell, senior analyst at Edmunds.com auto research and shopping site.
The Obama administration emphasized today that the loss it took on GM shares was far less costly than allowing GM to fail.
“Inaction could have cost the broader economy more than one million jobs, billions in lost personal savings, and significantly reduced economic production,” Treasury Secretary Jacob Lew said in a statement.
GM and Chrysler both went through government-scripted Chapter 11 bankruptcy reorganizations in 2009. Treasury put $12.3 billion into Chrysler and recovered $11.13 billion of that before the books were closed. Chrysler now is majority owned by Italy’s Fiat.
A study announced today by the Center for Automotive Research at Ann Arbor, Mich, says the federal rescue of GM saved 1.2 million jobs and preserved $34.9 billion in tax revenue.