Panel: GM stock sale may trim taxpayer recovery
WASHINGTON – By selling a block of its shares in General Motors Co. for
$33 each — a price far below the "break-even" point — the government
sharply reduced the chances of taxpayers fully recovering their $50
billion investment in the auto giant, a new report from a congressional
The Treasury Department did gain a "major recovery" of taxpayer aid,
$13.5 billion, by selling a chunk of its GM stock in November, the
Congressional Oversight Panel said in a report issued Thursday. And the
$85 billion bailout of GM, Chrysler and auto lender GMAC — now known as
Ally Financial — seems to have put them "on the path to financial
stability," the report said.
But the companies still face uncertain futures, taxpayers remain at risk
and there are concerns about the government's openness in the
unprecedented rescue program, the report said.
Without the rescue from the Bush and Obama administrations starting in
December 2008, GM, Chrysler and GMAC would have faced the financial
abyss, the report said. Their failure would have been crushing blow on
The Obama administration has said the rescue was needed to prevent the
loss of at least a million jobs and economic devastation in the
industrial Midwest. Administration officials have said they never
expected to recoup the full investment.
An earlier estimate by the Congressional Budget Office that taxpayers
would lose $40 billion on the auto industry rescue has been slashed to
$19 billion, the oversight panel noted.
GM was pushed into bankruptcy protection by the Obama administration. It
emerged in 2009 with a balance sheet cleansed of its staggering debt.
The company has made an impressive turnaround from losing billions
before its restructuring to posting $4.2 billion in profits in the first
nine months of last year.
Still, the report said, by selling 45 percent of its GM shares for $33
each in the automaker's $15.8 billion initial public offering in
November, Treasury "locked in" a loss of billions of dollars and
diminished the likelihood of full repayment to taxpayers. The
"break-even" price needed for that is $44.59 a share, according to the
Government officials say that GM's stock price averaged only 3 percent
above $33 in the month following the IPO, confirming that it was fairly
"These are always tough decisions," Sen. Ted Kaufman, D-Del., the
panel's chairman, said in a conference call with reporters on Wednesday.
Treasury's decisions "may well have been reasonable" but the rescue
program's objectives should have been more clearly defined, he said.
GM's stock price has been rising as the company has performed better
than many expected. It closed Wednesday at $38.62. If the trend
continues, it's possible that taxpayers could be made whole.
The new report also:
_said the prospects for taxpayer recovery from Chrysler are reduced
because the government owns only 10 percent of the company's stock and
so has limited influence on the timing of an initial public offering.
_criticized what it called Treasury's "hands off" approach toward Ally
Financial, not always asserting its influence of the timing of an
eventual IPO. The department also declined to block GM's purchase of
AmeriCredit, even though that finance firm may end up competing against
Ally Financial, it said.
_said that the government's aid to prevent GM and Chrysler from failing
"has put more competently managed automotive companies at a
disadvantage," referring to Ford Motor Co.
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