DETROIT – The U.S. government’s short stint in the auto business is coming to an end.
The Treasury Department said Wednesday that it will sell its remaining stake in General Motors by early 2014, writing the final chapter of a $50 billion bailout that saved the auto giant but stoked a heated national debate about the government’s role in private industry.
Taxpayers are sure to lose billions of dollars in the deal, even though GM has bounced back from the darkest days of 2008, when it almost ran out of cash.
The company has racked $16 billion in profits during the past three years and added more than 2,000 American workers. Now GM is looking forward to the day when it can shed the stigma of government ownership and bury the derisive moniker of “Government Motors,” which it says kept customers away from dealerships.
“This is very attractive to the company and to our shareholders,” GM Chief Financial Officer Dan Ammann said. The deal is “obviously good for the business in terms of continuing to remove the perception of government involvement in the company, which is going to be good for sales.”
When the government sells its last GM shares, the Treasury Department projects that autos will be the biggest money-loser of all the corporate bailouts connected to the Great Recession. The government already lost more than $1 billion on the bailout of Chrysler, which has repaid all its loans.
“There should be no expectation about getting back the taxpayers’ money,” said Phillip Swagel, professor of public policy at the University of Maryland and a former assistant treasury secretary under President George W. Bush who authorized the first installment of GM’s bailout.
Under the deal, GM will spend $5.5 billion to buy back 200 million shares from the Treasury at $27.50 each, with the sale closing before year’s end.
That will leave the government with 300 million shares, or a 19 percent stake, which it plans to sell during the next 12 to 15 months. GM will fund the deal from its cash balance, which at the end of September was close to $32 billion.
The Treasury Department has held the stock for more than two years while awaiting a better price. It issued a statement Wednesday that said the bailout protected the business at a critical time.
“The auto industry rescue helped save more than a million jobs during a severe economic crisis,” said Timothy Massad, Treasury’s assistant secretary for financial stability. “The government should not be in the business of owning stakes in private companies for an indefinite period of time.”
Treasury officials declined to answer questions from the Associated Press about why the government is selling now.
The government clearly waited until after the presidential election to unload the stake and close the bailout, which was a contested issue in the campaign between President Barack Obama and Republican challenger Mitt Romney. Yet the sale comes as U.S. auto sales are rising, and many analysts predict a higher GM stock price in the coming years.