U.S. swallows $10.5 billion loss on cashed-up General Motors (GM) bailout

Canadian Press, The Canadian Press
4 Comments| December 9, 2013


DETROIT _ The U.S. government ended up losing $10.5 billion on the General Motors Co. (NYSE: GM, Stock Forum) 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 a million jobs, and the economy could have slipped from recession into a depression, Treasury Secretary Jacob Lew said on a conference call with reporters.

Now, the American auto industry is back, President Barack Obama said in a statement. ``Some of the most high-tech, fuel-efficient cars in the world are once again designed, engineered, and built right here in America _ and the rest of the world is buying more of them than ever before,'' he said.

The government received 912 million GM shares, or a 60.8 per cent 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 per cent. Last month, the government said it expected to sell its remaining 2 per cent stake by the end of the year.

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.''

``We will always be grateful for the second chance extended to us, and we are doing our best to make the most of it,'' GM Chairman and CEO Dan Akerson said in a statement.

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.

GM shares rose 44 cents, or 1.1 per cent, to $41.34 in after-hours trading following the announcement. They rose 1.8 per cent in regular trading, at one point reaching $41.17, the highest level since GM's 2010 initial public offering.

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.

But critics say the bailout put the government in a position to choose winners and losers when it should have stayed out of private business.

``The American people are tired of Washington politicians taking their hard-earned money, using it to make risky bets and pick winners and losers, and coming up short,'' U.S. Rep. Jeb Hensarling, R-Texas, said in a statement.



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testfreak
GM CHAEAP JUNK. look at those 2014 chevy fully loaded pickups plastic cheap will go bankrupt again! dodge the anwser
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December 9, 2013
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TheBuss
So if you don't like people calling you "government motors" and you think you may sell more trucks if the government isn't involved with the company's finances, why don't you pay the Government back the $10.5 billion they lost with your $26 billion NOW sitting in the bank!
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December 9, 2013
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railwaze
No reason that the US government should not have recovered every dollar invested. Public dollars saved it....enough said.
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December 10, 2013
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hegemonicoblivion
It used to be, land of the free and.. going after the American dream was a possibility.. It does seem government has destroyed the concept of capitalism.. especially with its too big to fail concept.. and QE, which will go down in history as one of the biggest economic faux pas, of all time.. free enterprise, now that is truly laughable.
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December 9, 2013
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