Relief as US government sells final shares in General Motors
The US government's bailout of General Motors ended on Monday with the Treasury Department's announcement that it had sold its final shares of GM stock.
The sale closes a tumultuous chapter in the history of the US auto industry, and allows the nation's largest auto maker to continue its comeback free from the stigma of being known as "Government Motors".
Treasury Secretary Jacob Lew said the government sold the last of what was once a 60 per cent stake in GM. Taxpayers lost about $US10 billion on their $US49.5 billion investment in the Detroit auto maker.
"With the final sale of GM stock, this important chapter in our nation's history is now closed," Mr Lew said.
In all, taxpayers have ended up in the black on the crisis-related bailouts, Treasury officials said. It has recovered $US433 billion from the Troubled Asset Relief Program after initially investing about $US422 billion. The announcement of the sale brought a collective sigh of relief from GM officials, who have struggled to win back consumers who were loath to buy a vehicle from an auto maker under the yoke of government ownership.
"It's been a long, hard road," said Mark Reuss, the president of GM's North American division, before the announcement.
It was five years ago that President George W. Bush decided to make emergency loans to prevent the collapse of GM and Chrysler.
In 2009, President Barack Obama undertook a sweeping effort to save the beleaguered car companies by appointing a task force to lead GM and Chrysler through bankruptcy.
Overall, the government spent more than $US80 billion to save GM, Chrysler and their suppliers. Ford Motor survived the recession without direct financial aid from Washington. On Monday, Mr Obama described the bailout as a calculated bet on the domestic auto industry's ability to recover and become competitive again. "When things looked darkest for our most iconic industry, we bet on what was true: the ingenuity and resilience of the proud, hard-working men and women who make this country strong," the President said in a statement.
GM became a public company again in 2010 when it made what at the time was the largest initial public stock offering.
But the company's turnaround has been challenging and at times painful.
As part of his rescue plan in 2009, Mr Obama required that GM's chief executive, Rick Wagoner, resign.
And the President's task force required other wrenching changes on the company, including eliminating divisions like Pontiac and Saturn, cutting dealers and employees, and demanding that GM overhaul its insulated corporate culture.
Automotive specialists said the aggressive intervention by Bush and Obama was necessary to prevent a total breakdown of the industry - one of the largest manufacturing sectors in the US economy.
"It had to be done because the entire industry was in a depression, and it could have dragged the whole country into one," said David Cole, the former chairman of the Centre for Automotive Research in Michigan.
A report released recently by Mr Cole's organisation estimated that the government's auto bailout helped save 1.2 million jobs in the US, including those at suppliers and dealers. The healthy state of the industry today is in contrast to when it began its free-fall five years ago. GM had been losing billions for years because of unprofitable products, an excess of production capacity, and the spiralling costs of pensions and health care for hundreds of thousands of retirees and relatives.
Because of GM's precarious position, the government took stock in the company in exchange for its financial aid. Since the initial public offering in 2010, the Treasury Department has methodically sold its shares, culminating in Monday's final sale, of about 2 per cent of the company.
Malcolm Maiden — Page 34