By Zachary A. Goldfarb
Thursday, December 20, 2012
The much-debated bailout of Detroit is finally nearing an end after four years — and it looks like the ultimate cost to taxpayers will be between $10 billion and $20 billion.
Having already disposed of its stake in Chrysler, the Treasury Department announced Wednesday that it is now planning to sell its 500 million shares of General Motors stock. The company is buying back 200 million of those shares for $5.5 billion, while the Treasury is developing a plan to sell the rest over the next 12 to 15 months.
When it comes to making coins, the Mint isn’t getting its two cents worth.
If the remaining stock sells at $27.18 a share, GM’s price as of 4 p.m. Wednesday, the government will have sustained a final loss of about $12 billion in its investment in GM. Treasury lost $1.3 billion on Chrysler and still is owed $11.4 billion by Ally Financial, formerly GM’s financing affiliate, to come out even on that investment.
Though the auto bailout is likely to produce a financial loss for the federal government, it was part of a financial rescue that far exceeded expectations. Treasury has recouped 90 percent of the $418 billion it invested in banks, autos and other firms as part of the overall financial bailout.
“The auto industry rescue helped save more than a million jobs during a severe economic crisis, but [the intervention] was always meant to be a temporary, emergency program,” said Timothy G. Massad, Treasury assistant secretary for financial stability, in a statement. “The government should not be in the business of owning stakes in private companies for an indefinite period of time.”
The Treasury’s original total investment in the auto industry was about $80 billion, including $50 billion in GM.
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