U.S. Hurries to Sell GM Stake By SHARON TERLEP APRIL 19, 2011
The U.S. government plans to sell a significant share of its remaining stake in General Motors Co. this summer despite the disappointing performance of the auto maker's stock, people familiar with the matter said.
A sale within the next several months would almost certainly mean U.S. taxpayers will take a loss on their $50 billion rescue of the Detroit auto maker in 2009.
To break even, the U.S. Treasury would need to sell its remaining stake—about 500 million shares—at $53 apiece. GM closed off 27 cents a share at $29.97 in 4 p.m. trading Monday on the New York Stock Exchange, hitting a new low since its $33-a-share November initial public offering...
Shares have been hurt by rising fuel prices, industry production disruptions and management turnover. At Monday's price, and taking into account shares sold during the IPO, taxpayers would lose more than $11 billion on the rescue if the government dumped the rest of its stake now.
Government officials are willing to take the loss because the Obama administration would like to sever its last ties to the auto maker, the people familiar with the matter said. A summer sale makes it more likely Treasury could sell all of its stake in GM by year's end, avoiding a potentially controversial sale in the 2012 presidential election year...
...GM's successful $23.1 billion IPO in November reduced the U.S. government's stake in GM to 26.5% from 61%. As a condition of the IPO, the Treasury isn't able to sell additional holdings before May 22.
At the time of the IPO, Treasury officials and banks underwriting the deal believed the price would climb through the winter, enabling the government to sell most or all of its remaining stake within weeks of the lifting of the sales restriction at a narrower loss to taxpayers, the people familiar said.
Shares have fallen by recent events that have undermined investor confidence in GM. Those include the rise in gas prices, which hurt sales of big, highly profitable trucks. Wall Street also is fretting over recent management moves such as the unexpected departure of Chief Financial Officer Chris Liddell...
...GM share price could become further depressed after investors holding bonds of the now-bankrupt "old-GM" receive warrants and stock for existing GM shares. That will happen April 21..
What a cluster f@&$. We waste tens of billions of dollars shoring up the UAW and stopping the real reform needed. The Big Three cannot continue with their current business model. Paying furloughed workers over 90% of their pay and benefits is un-sustainable. No business can live like that and one major failure of George Bush was not pushing GM and Chrysler into bankruptcy court before the reign of error of Obama started. If they had, the contracts with the UAW could have been reformed, thousands of dealerships would still be open, our auto industry would be on a much better business plan, the bond holders wouldn't have been screwed over and the tax payers would not be on the hook for over a hundred billion.
Please, remember this when you vote...how did we ever get into this condition!