GM stock soars as split from Uncle Sam begins

The automaker needs to break its ties to the Treasury and will spend $5.5 billion to buy back shares. The government is in no rush to sell its remaining stake, however.

By Jason Notte Dec 19, 2012 1:29PM

General Motors Corp. headquarters in Detroit (Paul Sancya/AP Photo)All those "Government Motors" jabs apparently got to General Motors (GM). The automaker is now willing to part with billions to speed Uncle Sam's departure from its day-to-day operations.


GM threw together a near-impromptu press conference Wednesday morning to announce its plan to spend $5.5 billion to buy back 200 million shares of its stock from the Treasury by the end of this year. For its part, the government plans to sell its remaining stake of 300 million shares on the open market over the next 12 to 15 months.


If GM seems somewhat less than appreciative of the $51 billion it received from taxpayers in 2008 for its post-bankruptcy restructuring in 2009, it's because some of those same taxpayers have been vocally resentful of the deal. GM chief financial officer Dan Ammann told those assembled at the press conference that GM's market research shows government ownership has stifled car and truck sales.


Pressure increased when Mitt Romney used the GM bailout as a plank in his presidential campaign, saying it never should have happened and vowing to sell off GM shares if elected. General Motors chief executive Dan Akerson was less diplomatic about the situation, calling the bailout a "political punching bag" that led pockets of car buyers and dealers to shun the automaker.


"This announcement is an important step in bringing closure to the successful auto industry rescue," Akerson said in a statement Wednesday. "It further removes the perception of government ownership of GM among customers, and it demonstrates confidence in GM's progress and our future."


The government, meanwhile, is in no rush to sell off shares. After the GM buyback, it will still have about $22 billion in bailout funds outstanding. GM's paying 8% more per share than the $25.49 they were worth when the market closed on Tuesday, but the Treasury would have to sell its remaining 19% stake in GM for between $52 and $72 a share just to break even.


The Treasury Department issued a statement saying it will sell the shares "in an orderly fashion" within the next 12 to 15 months, but there's a bit of a catch. The government inserted a "market conditions" clause in that statement to give it plenty of breathing room just in case GM's shares go sour. It could buy back those shares in 15 years, it could buy them back in 30: It's all a matter of how much of a return the government sees on its investment.


GM shares rose roughly 8% on Wednesday morning, nearly erasing the premium GM paid on them. Ammann says that the reduced number of shares on the market should boost the price even further, though the stock is still trading below its $33 initial public offering in 2010. US News columnist Rick Newman is predicting at least a $5 billion loss for taxpayers from the deal, but that's still a speculative and clinical take on the broad-reaching bailout.


According to the Center For Automotive research, it's estimated that federal funds saved 1.5 million jobs at both General Motors and Chrysler. GM posted record profits of $7.6 billion in 2011, got the leverage it needed in talks with the United Auto Workers and was able to start hiring again this year, albeit at considerably lower wages than older workers received. Overall global sales volume rose 7.6% to 9 million in 2011. That moved GM back to the top spot in world auto sales that it occupied for 77 years before falling behind Toyota (TM) in 2008.


Even GM's product itself is improving. Weak and redundant brands are gone. New post-bailout cars like the Chevrolet Cruze and Sonic have helped boost GM's car sales 8% within the last year, according to MotorIntelligence. Its Chevrolet Silverado and GMC Sierra trucks hadn't been overhauled since 2007 and were losing market share as bailout-averse truck buyers moved to Ford (F), Italian-owned Dodge and even Toyota, Honda (HMC) and Nissan (NSANY). The trucks are now slated for a revamp in 2013, despite the fact that the Silverado is still the second-best selling car in the country.


General Motors looks at its post-bailout incarnation and sees a healthy company that could be a whole lot healthier if it emerged from the Treasury's shadow. The government, meanwhile, that same healthy company with all its jobs and sales, but also sees more than $20 billion in debt. The latter, combined with pressure from those same "Government Motors"-hating taxpayers -- is going to make it extremely difficult to let go of the former.


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58Comments
Dec 23, 2012 3:17PM
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Oh ya visitor , all them pooor billionaires ... Obama does not control the feds ! Nor does congress . And the bailout of wall street and GM was started by Bush , not Obama ! The wall street pukes have paid back their money and now for yrs have had zero int rates . do you ? Or We ? Ya them wall street billionaires are so broke to pay the same tax rate as me ? LMFAO. And them poor GM bond holders who paid 20 cents on the dollar ! But wanted 1.00 back from the tax payers and bankruptcy Judge.. LOL .. GM supports about 200.000 jobs in this country for starters ! Union and NON Union.. Wall street has had the Bush tax cut for over a decade to create jobs ?? Still looking for that ?? LMFAO.. So the QE1-2-3- and the tax cuts to the rich for over a decade to create jobs and the ZERO int rates to wall street banks , all in the name of making jobs LMFAO we should have unemployment at 2% by now .. LOL Rant on fair and balanced .... Fox news they won't tell you what i just did... LMFAO...
Dec 21, 2012 12:44PM
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See what happens when you split from the Federal Government....you make a profit.

 

Did any of you Pin Head Liberals learn anything here today?

 

 

Probably not.  ^J^

Dec 20, 2012 9:05PM
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The Longer the Federal Government has any control in GM the less likely they can make this Company Profitable. Just look at what they have done to the Post Office
Dec 20, 2012 6:26PM
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It is our money!  When the treasury spends it all on failing enterprises they just raise our taxes to fund more blunders. Sooner or later you run out of money. Up's nothing left for entitlements!!!! What then. I know   print more money devalue it further.
Dec 20, 2012 4:36PM
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People ignore that Bush authorized the first 17 billion to GM and Obama added another 33 billion when it wasn't enough to save them. Romney opposed the bailout Bush didn't.

Dec 20, 2012 4:33PM
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See what happens when you break away from the Federal Government....Your stock goes up.....Hello. I hope you pin head liberals understand this example....but my guess is it will just go right over your little pin heads again.

 

Why in the world would Americans want  the Federal Government to run thire health care....OMG what a train wreck we're gona see....REAL SOON.

Dec 20, 2012 2:47PM
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i was a chevy man for 20 years and now i bought my first new ford, f 150, chevy is about 3 years behind on their trucks. they are just now putting in engines and amenities that ford has put in theirs since 2011. as for the camaro if you ever get in one you cant see a thing, visability is horrible out of all the side windows and the back. the mustang and chargers and challengers are much more real world options. corvette is still great even with its problems. gm has dropped the ball alot in the last 10 years and is still doing it. they shold not have a buyout option for the federal loans they should pay in full with interest and thank the people this country for the help.
Dec 20, 2012 2:46PM
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The only reason GM is still around is because  about 70% of all their sales go to the Federal and State Governments.
Dec 20, 2012 10:46AM
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I would love a new GMC truck BUUUUUUT............is that there door panels are cheap ugly plastic along with the dashboard. It reminds me of late 70's and 80's pickup trucks. The chrome peels from the door handles, the frames on a 2 or 3 year truck is rusted, bow tie emblems fall off of them, etc. My friends dad wishes he never traded down to a newer Suburban. I am holding onto my 98 Tahoe because the quality and build on that era of GM truck is impeccable. I have 152+k on mine and not a speck of rust. Nice carpeted door panels. Tank like ride.

Sorry GM step up the interior quality and materials. Cheap bastards!
Dec 19, 2012 10:43PM
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I cant wait till chevy sells there diesel cruze .all you people bashing gm are just trying to justify buying your foreign cars .that's the real problem in the first place.
Dec 19, 2012 8:52PM
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In my opinion if GM wants to come roaring back they need to give back to the retirees everything they lost - retirement, insurance, stock. They should give the same number of stock owned to everyone that lost stock when they went bankrupt. You can't just walk all over the people that continued to back you, bought  your product, and touted your brand. I would have more faith in them if they were trying to do the right thing.
Dec 19, 2012 8:12PM
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The Bailout was necessary and a success.  Now is a matter of  selling off the rest of the stocks left.  I say the government should wait until the stock price goes up and then sell. So far on paper we are 20 Billion dollars short.  It's not so bad.  It's better than the Iraq war deal.  We are down in the Trillions there and nothing left to pay us back.  Ohhh yes Dich Cheney and Haliburton did benefit though.
Dec 19, 2012 6:27PM
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  I would only purchase a GM product if they offered a reasonably priced warranty of 200,000 miles.  I don't like saying it, but I am a GM hater because of the bailout. 
   In addition, I've owned GM products for 30 years and my Dad before me.  I've done many of the repairs and maintenance myself.  The quality and serviceability just haven't been there.  Some of the problems should have been recalls (Ex: 3.4 V6 manifold gasket), but GM chose not to honor their mistake(s).
  Does a bailout lead to a culture change?  I doubt it and haven't seen any evidence of it.
   
Dec 19, 2012 5:39PM
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The ones who took the majority of the hit when the BIG 3 bailout occurred was the employees and independent owner/ operators that were FORCED to close their doors and hand over their stock. Thousands of employees were forced to find employment elsewhere. As a GM employee for over 15 years, I lost all my stock options during that time, but still remain a loyal employee for a company that i believe in! I'm glad GM is buying the stock back. That way I can reinvest in the company that has given me my livelihood.

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GM (aka Government Motors) has no cash. The money they have is taxpayers money. They should be paying back all the money they stole from the investors and bond holders. Bankruptcy is nothing except legalized stealing. I will follow my grandfathers advice, "Pay your bills!, You may have to do without some things........But no one trust people or businesses who don't pay their bills". That is why GM sales are not meeting expectations' because a lot of people do not trust thieves.
Dec 19, 2012 3:51PM
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Oh boy we get half of what we paid. Yes your idiotic president has ****ed you over very well.
Dec 19, 2012 3:09PM
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You people that cry about the bailout saying it was taxpayer money get a real clue.  Did you have a claim to any of that money?  NO!  So how is it taxpayer money? Its the treasury money not taxpayer.  You had no claim to it before and you have no claim to it now no matter if they make or lose money on GM. 

 

Say the government made $10 billion profit from it would the Citizens get any of that money?  NO they wouldnt so why does anyone care?

Dec 19, 2012 2:57PM
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Why are you people bitching??? The feds are buying 40 billion a month in toxic mortgage loans from wall street! And you idiots are ranting about GM ?? What about QE1 QE2 and now QE3 at 40 billion a month!!!! What a bunch of idiots you republicans truly are !!!!<<< Never talk about that??? Where do you think Ben and the boys are getting the cash from ???
Dec 19, 2012 2:17PM
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Of course GM wants to buy back the government owned shares at rock bottom prices, and not wait until the shares are priced high enough for the American public to get our tax money back from Obama Motors. With that said, I am one of those who will never buy a new GM vehicle until the taxpayers get back to even on the Union/Obama  inspired rip-off of the American taxpayer. 
Dec 19, 2012 2:02PM
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So, we (US treasury) will be taking a hit for between 7 billion and 13 billion. Who cares. It is only billions of dollars.



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