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US government sells last GM shares
Final General Motors shares sold by US government following 2009 bail-out
10 Dec 2013
THE United States government has sold its final shares in General Motors, more than four years after bailing the Detroit-based automotive giant out during the global financial crisis.
As a result of the GFC, the US government took a 61 per cent stake in the car-maker under deals from both the Bush and Obama administration to avoid liquidation. The decision led some to call GM 'Government Motors'.
A statement from the US treasury department says it has recouped a total of US$39 billion from its original investment of $49.5 billion, confirming a loss of around $10 billion.
“Treasury will continue to wind down the remaining investments in a manner that balances maximizing the taxpayer’s return on investments with the speed of our exit,” the department said in a statement.
GM shares closed at $40.90 in the US today, hitting their highest level since the company began trading publicly three years ago.
General Motors chairman and CEO Dan Akerson said he was thankful for the government's support and is focussed on the continual improvements being made to remain profitable.
“The U.S. Treasury’s ownership exit closes just one chapter in GM’s ongoing turnaround story,” he said.
“We will always be grateful for the second chance extended to us and we are doing our best to make the most of it. Today is not dramatically different from the hundreds of preceding days during which we have worked to make GM a company our country can be proud of again.
“Continued investments, innovation, and job creation are just some of the “returns” of a healthy GM and domestic auto industry. Our work continues uninterrupted, and we will keep our sights squarely on our customers and transforming the way we do business.” Earlier this week, a report by researchers at the US Centre for Automotive Research found that the government cash injection to GM and Chrysler avoided losses of US$105.3 billion in transfer payments and personal and social insurance tax collections.
The report titled “The Effect on the U.S. Economy of the Successful Restructuring of General Motors” by researchers Sean McAlinden and Debra Maranger Menk also found that around 2.6 million jobs were saved in 2009 alone as a result of the bail-out.
“If the U.S. government had refused to assist (GM and Chrysler)… in a financial crisis of unprecedented proportions, then the whole U.S. economy was operating without a safety net, with the exception of course, of the banking system,” the report concluded.
GM declared Chapter 11 bankruptcy in June 2009, the fourth largest bankruptcy of its kind in US history, following Lehman Brothers, Washington Mutual and WorldCom.
Fellow Detroit-based automotive Goliaths Ford and Chrysler sought federal government funding to stay afloat, but this was rejected and Chrysler was forced into Chapter 11 bankruptcy as well, resulting in its partnership with Italian car-making giant Fiat.
Ford managed to avoid bankruptcy by implementing an aggressive strategy to slash costs through job cuts, plant closures and platform sharing.
As a part of a massive post-bankruptcy restructure, GM discontinued its North America-only Pontiac and Saturn brands and tried unsuccessfully to sell its Hummer military-style off-roader subsidiary to a Chinese conglomerate, resulting in the brand's death.
The company made a number of attempts to off-load loss-making Swedish brand Saab as a part of the restructure, eventually finding a buyer in niche Swedish car-maker Spyker Cars in 2010.
GM had confirmed it would also sell-off its European Opel and Vauxhall brands, before changing its mind at the last minute.
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