GM-No More Government Motors?

GM-No More Government Motors?

GM RenCen-s-yavno-via wiki


GM has announced plans to finish a $5.5 billion buyback of stock currently owned by the U.S. Treasury ((The Wall Street Journal). The purchase is part of a larger plan to end government ownership of the auto giant within the next fifteen months.

Alas, the taxpayers are not coming out ahead on the deal. GM’s stock has languished since its initial public offering at $33 per share in 2010, and now trades in the mid $20’s. The buyback price of $27.50 represents a 7.9% premium, and bumped the price of the stock up to $27.18. The WSJ notes:

The Obama administration had been reluctant to sell its GM shares before the November election, in part because of the auto maker’s sagging stock price. It needed the stock to hit $52.39 a share to break even. Now it must sell its remaining shares at $69.72 to break even.

The skeptical mind might think at this point that breaking even is no longer on the table. Still, a deficit-plagued government can use the cash, and politicians would no doubt like to put behind them the resentment at the excesses of the Troubled Asset Relief Program. GM itself is anxious to cut the cord, as the nickname “Government Motors” has unquestionably damaged its brand. And then there is this nugget:

As part of the deal, the Treasury has immediately waived some limitations on the auto maker, such as use of private aircraft to transport executives. Mr. Ammann declined to say when or if GM will move to lease or purchase private aircraft. The inability to use private aircraft has been a sticking point with many GM executives.

As the French would say, the more things change, the more they stay the same.

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Retired from American Airlines after a 34 year career. Finance professional with strong background in corporate treasury management and personal income taxes. Graduate of Georgetown University (BS Foreign Service) and The University of Texas at Arlington (MBA). Contributor to TMR since 2007. Host of "Italian Tomatoes" show on Blog Talk Radio. I am a center-right Republican with a passion for business, history and current affairs. Go to Blog Talk Radio to listen to my latest show Beyond Foxy News

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