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U.S. Plays Big Role in Share Offering of General Motors

August 19, 2010
2 min to read


WASHINGTON — As General Motors moves to become a public company again, all the big decisions on the timing, size and price of the share offering will be left to its largest shareholder: the U.S. government.


The Obama administration, mindful of the politics surrounding its $50 billion GM bailout, says it is eager to liquidate its 61 percent stake in GM as swiftly and lucratively as possible, The Wall Street Journal reported.

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But administration officials say there is no push to sell shares before the November midterm elections. "We want to do this as quickly as practicable, but in a way that protects our investment," an Obama official familiar with timing discussions told the Journal.


The outcome of GM's share offering will be a critical political milestone for the Obama White House. The administration's decision last year to undertake a federal intervention in the affairs of the nation's largest auto maker—firing GM chief executive Rick Wagoner and steering it through a bankruptcy restructuring—provoked a backlash among conservatives. GM executives say that backlash also extends to potential customers, who say they will bypass the auto maker because they object to the federal bailout.


The White House said it had to step in to prop up GM and the smaller Chrysler to avoid chaotic collapses at two huge employers in the nation's heartland.


Now, as President Barack Obama tours the country to defend his economic policies, he has pointed to the rebounding auto industry to make the case that the taxpayer-funded interventions at GM and Chrysler accomplished their goals: Saving two iconic companies and salvaging thousands of jobs.


In a swing through Michigan last month, President Obama said that the entire U.S. auto industry was at risk in early 2009, when his administration decided to usher GM and Chrysler through bankruptcy proceedings with the help of tens of billions of dollars in taxpayer assistance.

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"The industry looked like it was going over a cliff," he told workers at a Chrysler plant.


He then cited figures showing that the U.S. auto industry had hired 55,000 new workers in the year since GM and Chrysler emerged from bankruptcy protection last summer, after shedding 334,000 jobs in the year leading up to the GM and Chrysler bankruptcies.


The GM IPO, though, will end up answering a much simpler question: How much did taxpayers lose—or gain—by bailing out GM last year?


Analysts say that the market would have to value GM's stock at around $70 billion for the government to recover the whole of its remaining investment—a target that some say is unlikely, but not impossible.

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