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Treasury Optimistic About GM Share Price

January 11, 2011
2 min to read


DETROIT — The recent surge in General Motors Co.'s stock price bodes well for the company's goal to cut ties with the U.S. government, said Ron Bloom, U.S. Treasury's point person on GM.


Mr. Bloom said in an interview Tuesday that the Obama administration is pleased with the auto maker's share performance and "serious" about selling the remainder of its stake in the company.

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GM and its stock underwriters are increasingly optimistic that the Treasury will sell most or all of its remaining stake next year, rather than offloading shares gradually over the next few years, reported The Wall Street Journal. The U.S. Treasury reduced its GM stake to 26.5 percent from 61 percent in November's $23.1 billion GM initial public stock offering.


"At some point we are going to sell the remainder of our shares, so [the stock price increase] is a good thing," Mr. Bloom said. "The size of the initial IPO ought to give people some indication that we are serious about exiting as soon as practicable."


Before the IPO, GM Chief Executive Daniel Akerson said he had expected the Treasury could take several years to sell its stake.


Banks underwriting the stock sale and GM executives would prefer to see the government cut ties with GM more quickly, according to people familiar with the matter. GM's government ties, while dramatically reduced from a year ago, remain a turnoff to some potential investors and customers, they worry. Chrysler Group LLC, also a bailout recipient part-owned by the government, has echoed that sentiment.


Mr. Bloom said the Treasury will balance its desire to exit from GM with an obligation to recoup as much as possible of the government's $50 billion bailout of GM. He said too much uncertainty remains around GM's performance and the health of the overall auto market to know whether the Treasury could meet its objectives with major stock sale in 2011.

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"If the stock price goes down, we would then be reporting a larger loss [on the government stake] and that would be an issue which we would have to take into account," Mr. Bloom said. "Investing in private companies is best done by private investors and getting out has a broad benefit for the financial markets. We are of course also mindful of our commitment to taxpayers."


The Treasury needs to sell it remaining GM shares at an average price of $53 each to break even on the bailout. GM shares were trading at $38.91 at midafternoon Tuesday, compared with the $33 IPO price.


Mr. Bloom declined to comment on his future in the Obama administration. He has been in the running for a new position overseeing the White House's manufacturing policy.

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