Washington hires banks to hold GM stock sale
DETROIT - The U.S. Treasury Department has hired JPMorgan Securities and Citigroup Global Markets to sell its remaining stake in General Motors and bring an end to almost four years of partial U.S. government ownership of the car maker.
The government, which got its stake in a $49.5 billion bailout of the company in 2009, still holds 300 million shares of GM common stock, giving it 19 per cent of the auto giant.
Treasury officials revealed hiring JPMorgan and Citigroup on Wednesday in documents posted on the department's website.
The banks will get one cent for every share they sell for a fee of up to $3 million.
The documents gave no timetable for sale of the remaining shares, but the government has said it intends to be out of GM by early next year.
Contracts with the two banks run through Jan. 14, 2014, but can be extended in 90-day increments or through mutual agreement. Extensions can't go longer than Jan. 14, 2017.
The U.S. government is still $21.5 billion in the hole on the GM bailout. Breaking even would require selling the remaining 300 million shares for an average of about $70 each — more than double the current trading price.
It remains unclear when Ottawa and the Ontario government will divest their holdings, which together total some nine per cent after having contributed $13.7 billion to help bail out North American automakers GM and Chrysler.
Last month, federal Finance Minister Jim Flaherty said his Conservative government was not interested in being long-term shareholder in private corporations, including publicly traded private businesses.
However, Flaherty also noted that Ottawa wanted to recoup as much of its bailout money as possible.
"We will not sell the shares without getting the best value we can for Canadian taxpayers,'' he said at the time.
When the U.S. government stock is finally sold, it will end a sad chapter in GM's history.
The company nearly ran out of cash in 2008 and needed government money to survive a trip through bankruptcy reorganization. Since then, GM has posted 11 straight quarters of profits, piling up $16 billion in net income. Last month, the company bought 200 million of its shares from the government for $5.5 billion.
The bailout has rankled many taxpayers who thought the government shouldn't have interfered with the company's business. Some still call GM "Government Motors."
President Barack Obama, who was responsible for engineering much of the bailout, touted his role in the 2012 presidential election, saying it saved one million jobs and prevented the collapse of America's auto industry. GM has said that once the shares are sold, it expects its sales to increase. Some people have refused to buy GM cars and trucks as long as the government owns a stake.
The Treasury Department has held the stock for more than two years, awaiting a better price. GM shares sold for $33 each when they began publicly trading again in November, 2010. The shares rose shortly after the sale but fell dramatically early this year as the U.S. economy slowed and Europe headed toward recession. Then, a strengthening U.S. auto sales recovery and the stock buyback pushed the price back above $30 for a time.
GM shares closed down $1.29, or 4 per cent, at $29.31 on Wednesday.
— With files from The Canadian Press