By on December 19, 2012

It has been repeatedly suggested that GM should use its ample profits to buy back the shares held by the U.S. government (don’t forget the Canadians.). Finally, GM listens to reasons. Or, possibly, strong suggestions from Washington. GM will purchase 200 million shares of GM common stock held by the U.S. Department of the Treasury for $5.5 billion, or $27.50 per share, the company said in a statement  The share buyback is part of the Treasury’s plan, also announced today, to fully exit its entire holdings of GM stock within 12 to 15 months, subject to market conditions.

Stock buyback plans usually lift the price of the share. Promptly, GM shares were up some 8 percent to 27.57 at the open.

After the buyback, Treasury will still own a stake of about 19 percent, down from about 26 percent currently. Treasury said it will sell its remaining stake of about 300.1 million shares “through various means in an orderly fashion” over the next 12 months to 15 months, and could begin the process as soon as January. That could bring the price down again.

According to Reuters, Treasury has agreed to relinquish certain governance rights, including required levels of U.S. manufacturing and barring the purchase of corporate jets. Senior executive payment caps under TARP remain in place. Once Uncle Sam is completely out of the picture, it will be bonus time at RenCen.

The Canadians remained unmentioned in the declarations of impending independence. Canadian Finance Minister Jim Flaherty told Reuters that his government has no immediate plans to sell its stake in General Motors. Not now, maybe later. Oh well, maybe Government Motors a little longer.

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47 Comments on “The TARP Is Lifting: Government Motors No More, In About A Year Or So...”


  • avatar
    28-Cars-Later

    “The Canadians were not mentioned.”

    That’s because the Canadians are going long on GM!

    Ottawa has more faith in the General than Washington (evidently).

  • avatar
    MeaCulpa

    So basically somebody at Boeing, Bombardier or Cessna is a very happy guy today as is his friends at Lufthansa Technik. I’m expecting a Citation X and a BBJ before 2013 is over, the later motivated by “the new Global GM’s need for rapid transportation of management and concerns over security in a rapidly changing and hostile(terrorist filled, euro trash, america hating) world”.

    And that’s just a stop-gap program until the eyes are of GM and it’s management and the usual bonus fueled ass and cake party can get started and a couple of more jets can be acquired

  • avatar
    mike978

    So after this sale the US Government stake in GM is less than the Lower Saxony Government stake in VW, which I don`t usually hear called Government-owned.

  • avatar
    philadlj

    This is good news…especially the “orderly fashion” bit (if it holds true).

    GM has just endured its first large-scale post-bailout dud in the new Malibu, and in light of all the incentives being placed on existing Silverados, there’s no telling if there’ll be enough demand for the new one to be an instant hit it needs to be. And don’t get me started on Opel.

    Under these circumstances, hoping for GM’s stock to rise to the level necessary to fully repay government investment is unlikely, and will remain so as long as the government owns more than a token share.

    • 0 avatar
      dan1malk

      But to get rid of the token share, the stock needs to rise to the necessary level… which is unlikely.

      It’s been pretty apparent since the IPO that the US won’t see a full cash return on it’s GM investment. Our return (as a country/government) is in all those thousands of people that still have jobs and will continue to pay income tax and contribute to the economy, even if it still has some growing pains. Our return is still having a relatively strong auto industry compared to other large world markets. Our return is in beasts like the ZR1, Viper and GT500.

      Unfortunately, our return is NOT a big fat check with an easy to calculate number on in. I’m happy that our country stepped in to help one of it’s largest entities. Yeah losing money sucks, but watching Corvettes, Vipers, and Mustang continue to hand it to the rest of the world is enough of a return for me. My personal return may be less relevant than some peoples, but I wish others saw that breaking even on the bailout isn’t necessarily just in the numbers.

  • avatar
    Dave M.

    And when they pay back the full amount owed….I’ll consider their products for myself or the dozens of folks who annually ask my car-buying advice.

    • 0 avatar
      bd2

      Doesn’t that just impede GM being able to pay the amount back (if people don’t purchase their products)?

      That would just make the tax dollars bailing out GM a total loss if GM goes into a financial downturn.

      And besides, did you want the US economy to go from a deep recession to another depression w/o the bailouts and have the taxpayers on hold for all the unemployment benefits that would be going to all the workers dependent on GM, Chrysler, their suppliers and the other businesses that depend on the domestic auto industry?

      • 0 avatar
        CarShark

        “And besides, did you want the US economy to go from a deep recession to another depression w/o the bailouts and have the taxpayers on hold for all the unemployment benefits that would be going to all the workers dependent on GM, Chrysler, their suppliers and the other businesses that depend on the domestic auto industry?”

        At times, I wonder…

        We let the chain reaction go off, and GM can’t get the financing for restructuring. It liquidates. How long before it’s pieces get bought up? Corvette would sell quickly, I’d imagine. Hell, the Chinese probably have a standing offer for Buick. The tooling must have some value, if not the plants themselves in union-dominated states. Let’s say the whole thing takes a year. I wonder whether the resulting deep recession or possible depression would have been as bad as all of those in favor of dumping taxpayer money down this particular well made it seem, especially once you realize that if GM were to screw up again, and need a bailout, there would be a precedent. That’s in addition to the political fear of letting tens of thousands of people lose their jobs in the middle of a weak recovery/secret recession. Americans don’t really have much of a stomach for creative destruction and other parts of capitalism. Sure Michigan is screwed more than everyone else, but that would have been the case regardless. At least there wouldn’t have been tens of billions of dollars loaned at teaser rates.

  • avatar
    Detroit-X

    Why not buy back at IPO price?

    With the convenient excuse of partial government ownership gone, and all the sub-excuses they attach to it, GM will be back in its familiar prime of ‘denial and deflection’ to explain their usual business-bungling. There is never any bad news out of GM, no matter how obvious the mistake, past or future. It’s always someone else’s fault, and “just wait till the new models are ready.”

  • avatar
    jacob_coulter

    Remember when this was all sold to us as a loan?

    I was against TARP for all parties involved, but I do think it’s ironic that the big banks were hated the most for the TARP bailout but ALL the major banks returned the TARP money WITH interest.

    http://dealbook.nytimes.com/2009/06/17/jpmorgan-repays-treasury-as-tarp-exits-continue/

    The car companies were the ones that really screwed over the taxpayer.

    • 0 avatar
      wsn

      The banks have generally good money making systems in place, and only needed a short term bridge loan. GM doesn’t. Only suckers would buy a GM car or willingly own GM stock, which is heading to 0 again.

    • 0 avatar
      bd2

      Much easier for banks/Wall St. to make $$ doing what they do (which, btw, got us in the whole mess in the 1st place) considering that they get $$ basically for free from the Feds.

      What would have really screwed over the taxpayers is for the economy to have gone from a deep recession to another depression and for all the unemployment benefits that would have to be doled out on the taxpayer’s dime.

  • avatar
    dan1malk

    “It has been repeatedly suggested (links to article)”

    Repeatedly suggested by yourself?

    I’m pretty sure there are other car companies with larger percentage of government help. The low hang GM (government motors) acronym is too low hanging, I guess.

    Can we get a little more creative than just regurgitating then same old troll’s-meme?

    • 0 avatar
      wsn

      Yes, the Chinese state owned companies. GM should join them.

      Oh wait, it already did …

    • 0 avatar
      shelvis

      You gotta love Bertel’s agenda.
      Working in China and Japan while telling Americans how good globalism is for them.
      Maybe we should discuss this GM high finance conspiracy theory nonsense less and demand to see who signs Bertel’s paychecks.

      • 0 avatar

        I’m glad you finally caught up on the Japan part.

        Now who’s signing my paychecks, Sheldon? The big ones seem to get lost in the mail somewhere along the long route … Any assistance as to the sender would be highly appreciated, I could use the money.

      • 0 avatar
        shelvis

        Transparency my dear boy. It would do wonders for your site and rep. It’s hard for me to take your other editors seriously as they point the finger at the old guard print magazines basically implying payola when you work in the industry in another country pushing the propaganda you do.
        If you’re on a car company’s payroll, even indirectly, the readers of this site deserve to know it.

      • 0 avatar

        Sheldon:

        Now that you are publicly accusing TTAC editors of being on the take, I recommend to do the following:

        - Supply the name of the paying party, along with a canceled check

        - Read the commenting guidelines at http://www.thetruthaboutcars.com/faqs/#commentpolicy

        - Get the hell off this website

        Two out of three will be fine.

  • avatar
    panayoti

    Though I favored the “loan” initially, simply because I felt that it was the right thing to do, I find it a continuing nuisance that like most investors, the government always buys high and sells low.

  • avatar
    Pch101

    Forgive me, but I’m just trying to understand this:

    You want the government to sell the stock at a loss, so that you can bitterly claim that the government took a loss.

    If you oppose the idea of locking in a loss unless absolutely necessary (and I certainly do), then the only reason that the government should sell below its effective purchase price would be that it probably can’t do any better.

    In my view, selling the stock for less than its effective purchase price is letting GM management off the hook, when they haven’t earned that privilege. The money came with strings attached, and they should be obliged to earn their way out of the situation by creating shareholder value.

    In contrast, it sounds as if you just want something to complain about. You want the loss to be locked in because it will give you another reason to complain, not because it actually makes one bit of sense to sell it.

    • 0 avatar
      28-Cars-Later

      “In my view, selling the stock for less than its effective purchase price is letting GM management off the hook, when they haven’t earned that privilege. The money came with strings attached, and they should be obliged to earn their way out of the situation by creating shareholder value.”

      I have to agree with this sentiment. I wonder if any of this is due to the election… my reasoning is perhaps the Treasury (and the administration) want out of this because they forecast another bankruptcy in the next four years and want them to fall flat as an “independent” company so as to avoid blame.

      • 0 avatar
        sunridge place

        Yep..that’s it. The whole company is propped up by a series of fluffed truck sales and government purchases of Volts and is going to come crashing down with $4000 rebates on Silverados.

        The government wants out before the house of cards collapses.

        You have it figured out perfectly. Do you believe in Santa and the Easter Bunny too?

      • 0 avatar
        28-Cars-Later

        You know I do and I think this year I’m going to ask him to fill your stocking with sincerity instead of coal.

    • 0 avatar
      Herm

      The Gov could easily do this, just make sure all the fleet purchases over the next few years are GM only.. once the stock goes up then sell.

  • avatar
    jkross22

    Slow clap.

    A step in the right direction, GM. The sooner you give me nothing to beat you over the head with, the sooner I will stop beating you over the head.

    I’ll still criticize your uncompetitive products, self defeating corporate culture and lack of leadership, but I will commend you for living up to your obligations to the US government.

    When should the treasury expect the next check?

  • avatar

    So how much does GM have to buy them back for in order for the U.S. Treasury to break even (so that everyone and his mother can stop kvetching about taxpayer waste and all of that nonsense)?

  • avatar

    Selling 40% of shares at $27.50 will only increase the break even price for the remaining stock to $70. It is safe to say that taxpayers will never get their full money back. They should be expected to pay in full over a decade or so. Not asking a lot from a company that makes $6B to $7B in profits a year. GM is going to sell these 200 million shares for $35 in a couple of years and net $1.5B.

    If i were GM, I would only ask for only 104 Million shares in exchange for $5.5B. Every year I would buy 40 Million shares back from the Govt at $50 a share for $2B. I would have paid back the taxpayers in full by ten years why which time if all goes well the share price would be anyway be higher than $50, getting me my full money back.

  • avatar
    Type57SC

    The image of a plodding GM and pushing UST is at odds with recent history. I recall GM executives pushing a buyback earlier in the year and the Treasury saying no. So why do you say “GM listens to reasons. Or, possibly, strong suggestions from Washington.”? or did you mean to say “Washington listens to reasons. Or, possibly, strong suggestions from GM.?

  • avatar
    vcficus

    I love how attached we get to our tax dollars… I’m personally happy the Feds (both aisles, before and after Nov 2008) threw some cash at these companies when I don’t believe they would have found any anywhere else… jobs, etc. Including mine :-)

    But if you’re really annoyed at the $20 billion or so automotive may have sucked up and you believe the banks ‘paid off their loans’ then why is Freddie and Fannie getting $150 billion to keep them afloat? All these Government Sponsered Enterprises did was keep the bad loans insured after the banks made them… the banks got to walk after their TARP and we get to pay for the guarantees.

    Oh, and it looks like while no one was looking that the FHA may have guaranteed a few billion more we’ll have to cough up here in 2013.

    So cars or houses… pick your expensive support structure and keep throwing money at it!

  • avatar
    el scotto

    Five Billion? I’d rather buy a cool nuclear powered aircraft carrier than some outstanding share of GM.

  • avatar
    Mike Kelley

    Of course this will be spun as some sort of “victory” for Obama and the crony socialists. It is not:

    http://nlpc.org/stories/2012/12/20/gm-buyback-treasury%E2%80%99s-shares-no-panacea


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