ANALYSIS: US to End GM Ownership By End of Year

DETROIT (Detroit Free Press/MCT) -

The U.S. Treasury Department expects to sell all its shares of General Motors Co. stock by the end of the year, leaving taxpayers with a $10 billion loss on a $49.5 billion investment, but also with a company that saved and added tens of thousands of jobs and now makes profitable, more appealing vehicles.

The earlier-than-expected exit will free GM from the “Government Motors” nickname, strengthen its ability to retain and attract talented workers and allow it to put more money into making better cars and trucks.

Critics of the 2009 bailout of GM and Chrysler will dispute the value of saving the companies, but there is no exact way to calculate how many people would have lost jobs and how much deeper the worst economic crisis since the Great Depression would have been had the companies failed.

“It was absolutely necessary that it happened,” said David Cole, chairman emeritus of the Ann Arbor, Mich.-based Center for Automotive Research. “The cost of it – some complain about the cost – it was very small compared to the impact had we gone into a national depression.”

The government’s exit is expected to make GM more attractive to investors.

The move will also lift limits on how much GM can pay its top 25 executives, a restriction that CEO Dan Akerson said more than once hindered his ability to attract the best candidates for leadership jobs.

The selloff would also end the politicization of government ownership, although no Treasury or any other government officials have been involved in managing GM.

“Treasury’s investment in the American auto industry was part of President Obama’s broader response to the financial crisis, and it helped save more than 1 million jobs,” Treasury Deputy Assistant Secretary Tim Bowler said in a statement. “Had we not acted to support the automotive industry, the cost to the country would have been substantial – in terms of lost jobs, lost tax revenue, reduced economic production, and other consequences. Our actions have enabled the industry to rebound.”

The government said it plans to continue selling its GM stock on a gradual basis in the open market, with the final 31.1 million shares sold by the end of the year. The government had announced in December 2012 that it will sell its final GM shares by April 2014.

The bailout gave GM the financial resources for a dramatic restructuring. The automaker shed thousands of jobs, cut hundreds of dealerships, killed four of its eight brands, wiped out stockholders and forced bondholders to take stock in the new company.

But it saved the company, which has made a profit in every quarter for the past three years.

“While the U.S. Treasury’s equity stake draws to a close, our work to transform GM continues,” GM said in a statement. “We’re making great progress in our efforts to make the most of this second chance by building outstanding cars and trucks, creating jobs and reinvesting in our country.”

The automaker recaptured its investment-grade credit rating earlier this year and returned to the Standard & Poor’s 500 Index in a big milestone, representing key benchmarks in the automaker’s financial revival.

The government said it had recouped $38.4 billion from its bailout of GM as of this morning.

“What most people still don’t understand is (that) what the auto industry went through was a depression. It was not a recession,” Cole said. “Had GM gone down, it would have taken the industry down, and very likely, the auto depression would have accelerated into a depression for the overall economy – and that would have been a real nightmare.”