The US government better be hoping for a stellar performance from GM if it hopes to sell its stock and break even after its 2009 bailout of the company. The value of GM stock has already increased by about 25% this year, but that still isn’t even close. It would need to hit $95.51 a share which is nearly three times what it’s selling for right now. Ouch.
The initial bailout was for $49.5 billion and it helped GM work its way through bankruptcy and come out the other side in one piece. The bailout was seen as necessary in order to prevent a collapse of the economy in the Midwest and was never something that was intended to turn a profit for the government.
It was a move that was met with public outcry from many who didn’t want their tax dollars being used to bail out floundering corporations from any sector, regardless of the consequences. It also earned GM the very unfortunate moniker of “Government Motors.”
The US government initially got a commanding 61% share in the company for the stock that it was issued during the bailout, but saw that number fall to 33% with GM’s public offering in November of 2010. Since then they’ve been slowly whittling away at their ownership by selling shares a little at a time depending on market conditions.
The goal is to be completely divested of GM stock by April of next year, and so far they’ve managed to take their ownership down to 189 million shares or about 14% of the company. Despite selling most of their stock, this leaves the US government sitting in a large $18.1 billion dollar hole that they’re not likely to get out of when its all over.
The government also saw a loss on its $12.5 billion bailout of Chrysler. That one wound up costing about $2.9 billion. The auto industry may have recovered thanks to the bailouts, but the same can’t be said about the US government’s coffers.
Nicole Wakelin fell in love with cars as a teenager when she got to go for a ride in a Ferrari. It was red and it was fast and that was all that mattered. Game over. She considers things a bit more carefully now, but still has a weakness for fast, beautiful cars. Nicole also writes for NerdApproved and GeekMom.
