GM, Treasury Department at Odds Over Government Stake
GM pushed a plan earlier this year to buy back 200 million of the government's share, around 40% of the total. The Treasury would divest the rest through a public offering, completely shedding the government's stake in the automaker after bailing out the company during the 2008 recession.
The plan would mean the government taking a $15 billion loss on the bailout, however - and Treasury officials aren't interested, the Journal says. The newspaper reports that the department expressed interest in selling off shares if the price reached into the $30s, minimizing loss at a realistic price - but with GM shares hanging around $24 in early Monday trading, the stock would need to appreciate 25% just to reach $30. It would take a stock price of $53 for the Treasury to break even - requiring an explosion in the stock that seems unlikely given the troubles of major automakers this year.
GM officials have grown antsy over the government stake, believing the automaker's reputation suffers through its criticized nickname, "Government Motors," the Journal reports. The government expects to lose $85 billion on the bailout of GM and rival Chrysler Group, a stark contrast to the profit picked up by its bailout of the financial industry and insurance giant AIG during the 2008 crisis.
The article GM, Treasury Department at Odds Over Government Stake originally appeared on Fool.com.Fool contributor Dan Carroll holds no positions in the stocks mentioned in this article.Motley Fool newsletter serviceshave recommended buying shares of General Motors. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.