Government sale of GM will cost taxpayers

(MoneyWatch) The government's decision to sell its remaining shares of General Motors (GM) means the automaker's bailout will likely wind up costing taxpayers at least $10 billion. If you include the bailout of GMAC, now a separate entity operating as Ally Financial, that number could swell to at least $15 billion.

In 2009 the Obama administration bailed out GM and Chrysler in an ultimately successful effort to save jobs by keeping the companies in business. The government spent $49.5 billion to stabilize and restructure GM and has so far recouped $28.7 billion of that.

Wednesday the Treasury Department announced plans to sell of its entire stake in the automaker over the next 15 months. GM has said it will buy back almost half of that stake, 200 million shares, for $5.5 billion by year end. GM is buying back its stock for $27.50 a share, 7.9 percent more than the current trading price.

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If GM's stock price rises over the coming year and the government is able to sell the remainder of its shares at the same price it will have lost $10 billion on the deal. The company's shares have gained 26 percent this year. Yesterday's closing level, $25.49, was 23 percent lower than the company's IPO price of $33 a share.

It's estimated that the stock would have had to trade at about $53 a share for the government to have made back all its money. The Treasury Department has said all along that it expected the auto makers' bailout to lose money. It expected those losses would be covered by the rescue of AIG -- which the government has so far made $22.7 billion on -- and the bank recapitalization program.

Also, the losses incurred on the GM bailout do not include revenues generated indirectly by income taxes from workers who would otherwise have had to be laid off and businesses which depended on GM for revenues.

The automaker was not the only part of GM to need a bailout. The government still owns 74 percent of Ally Financial, the bank formerly known as GMAC. To date, the department has earned back about one-third of its initial $17 billion investment. It is far from clear when the government will be able to sell that stake. That is unlikely to happen at all unless the company goes public or sells itself to a private equity firm. Ally has made no indication that it is preparing to do either yet.

[BobinJersey]

Obama lied again and Mitt was right. GM should have gone through bankruptcy, reorganized and not cost the taxpayers billions of dollars. But I have to hand it to Obama, he bought the union vote with U.S. dollars. Maybe the democrats would like to reimburse the treasury.

[CarsonCitySteve]

What is it with all this "middle class" squabble? By implication, the "lower class" and the "upper class" must not by Americans. And since we can't seem to define what "middle class" is, I guess no one is an American. Take your class warfare and .....

[Fred_Nelson]

I wonder if Obama will fly out to Michigan for the taxpayers instead of the unions, now that the truth is coming out. He stated to the unions "Right to work means right to work for less money!" The only ones who are getting less money are the taxpayers who are paying for this joke.

[vsmit]

Great News. The automobile manufacturers in right to work states in the South needed no bailout and are NOT going to cost taxpayers $10B. Now Michigan is a right to work state. There is hope.

[BWB2020]

Not to mention they will never make enough money to buy the products they produce, and so will not help the middle class recover.

Hope you find it great when your kids can't make even half as much as you, even with twice the work.

Sucker.

[johnlockesghost]

Is this one of those business enterprises that is too big to fail? Even though it has failed twice? Too big to fail, indeed, what a stupid idea!

[BWB2020]

Millions of newly-unemployed autoworkers, and those who become unemployed due to the ripple effect on ancillary businesses also going under, would have created a tidal wave of poverty.

Baggers have nothing to say as to how to keep that tide from descending into anarchy, or why a government should not act to keep a major part of the country's population able to eat.

It seems that "let them die off" is the baggers' answer, not realizing that they themselves are going to fall into the same situation.

It is clear that their "everyone for themselves" will be their motto up until the time when roving bands of bandits come their way, then it will be "use money to protect us, mister government".

Which is precisely what the government did, albeit before the country collapsed into anarchy.

[cubscout09]

You would think that this is breaking news from some of the posts below, but, the fact that GM stock would have to sell at $53/share for the taxpayer to break even is old, old news. The only thing new to me is that a 15 month time line has been adopted for the sell off, which incidentally, will drive down the price of GM stock.

[BWB2020]

Doesn't matter. The math in the story clearly shows that money is being repaid, but the losses are calculated because of the fall of the share price.

I find it funny how baggers decry the use of money to serve the interests of the American public at large, without stating what they propose to do about the tens of millions of people who would be without income had the automaker gone under.

The share price, BTW, is determined by the traders' willingness to buy at the lowest price they can get, and so they act in concert to drive the price down.

After the sale, they will hold it, and drive the price back up again, common trading practices that have nothing to do with the government, and everything to do with the collusion of their sacred, so-called "free market", which obviously isn't all that free.

[TimeToRetire]

Osama is dead. So is GM.

[PourpaixPourpaix]

Love it. Obama's a bum because he let Bush tank the economy in the months leading to Obama's first election, then he's criticized for doing nothing to instantly repair the damages and get everybody's job back after the worst financial disaster in 80 years, then he's criticized for not giving away money to business execs, now he's criticized for loaning money that saved thousands of jobs that increased tax revenues just like the Republicans have been yammering about.

And the nature documentaries try to convince me that an elephant is a smart animal. The zoologists should have another look at the data.

[TimeToRetire]

Four years later and we are still waiting. And we may have to wait another four years because it is not in the nature of a good liberal to energize consumption. In fact, a good liberal's job is to thwart consumption. Consumption and the well-being of the planet cannot co-exist is in the liberal bible. No consumption means no jobs. And no jobs is the best way to thwart consumption. Looks like Obama is winning.

[jschm2681]

Obama made Time Man of the year, obviously not for his math skills.

[jschm2681]

But of course 15 billion of taxpayer money is worth the millions of votes Obama got in his campaign from unions for doing this deal.
BTW- Faceless- that was our taxpayer money Obama lost, not 'they'.