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U.S. Unlikely to Recoup GM Bailout, Panel Says

January 13, 2011
3 min to read


The U.S. government is unlikely to recover its entire $50 billion investment in General Motors Co., in part because the Obama administration unloaded a big block of shares in the company's initial public offering at $33 a share rather than wait for a higher price, a federal panel said Wednesday.


The Treasury Department, which took majority ownership of GM in 2009 as part of the company's bankruptcy reorganization, sold $13.5 billion worth of GM shares in November, cutting its stake from 61% to about 33%, reported The Wall Street Journal. The U.S.'s stake is down to 26.5% on a fully-diluted basis.

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The decision to sell such a large stake, rather than hold onto the shares until their value appreciated further, "greatly reduced" the likelihood that taxpayers would be repaid in full, said the Congressional Oversight Panel, a body of outside experts that monitors bailout programs.


The Treasury has recovered about $23 billion in bailout funds it extended to GM. For the Treasury to break even, GM shares would have to reach about $53, the Congressional Oversight Panel said. GM shares were at $38.62, off 13 cents, in 4 p.m. New York Stock Exchange composite trading Tuesday.


In all, the government pumped about $81 billion into rescues of GM, Chrysler Group LLC and their affiliated credit arms, the report says, and has about $51 billion left to recover following GM's IPO.


The White House has said it is hopeful it will be able to recoup all the taxpayer money in GM through future sales.


The Treasury's point person on the auto bailouts, Ron Bloom, said Tuesday the government welcomes the recent rise in GM's share price, and said the administration wants to sell its remaining shares "as soon as practicable."

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Former Sen. Ted Kaufman, a Delaware Democrat who is the Congressional Oversight Panel chairman, said the administration should more clearly define its goals regarding GM so taxpayers can properly analyze the bailout efforts. The administration should define whether its top priority is to sell its shares quickly or to recoup taxpayer funds, he said. The administration has said only that it is balancing those goals.


The report said GM is on the path to financial stability but that its future business plans raise concerns. Those include what the report characterized as lackluster product launches planned for the U.S., a planned restructuring of European operations that is lagging and increasing competition in emerging markets abroad.


GM said in a statement that the report was about a period it was "committed not to repeat."


GM put much of its product spending on hold in the year leading up to bankruptcy, delaying critical vehicle launches such as a new line of high-margin pickup trucks and SUVs. Chief Executive Daniel Akerson and others acknowledged the impending product gap this week at the Detroit auto show.


The auto maker is racing to speed up development of new vehicles and refresh existing models, but is limited in its ability to bring vehicles to market quickly.

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"With the bankruptcy, we lost roughly a year in terms of development," Mr. Akerson said at an industry event on Tuesday. Major new launches will come in 2012 and 2013, Mr. Akerson indicated.

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