Bailout Check: Uncle Sam Dumping More GM Stock
Until the U.S. Treasury department sells its remaining shares of GM (NYSE:GM) stock, critics can still mock the automaker as “Government Motors.” That day could come as early as this coming January, according to reports. Since Uncle Sam still owns over 15 percent of GM, how it sells the rest of its shares could have a big impact on the company’s stock price.
All told, the GM bailout of nearly $50 billion will not be a profitable transaction for the U.S. government. The sale of its remaining GM stock will likely net the Treasury Department less than $10 billion, leaving the government close to $10 billion short (it has received about $30 billion back so far). Meanwhile, Uncle Sam is still waiting for its money back from Ford (NYSE:F), which technically did not get a bailout but was bailed out with a government loan of $5.9 billion. Without that money, few believe Ford would have survived.
In contrast, Tesla Motors (NASDAQ:TSLA) recently announced it would be repaying the $465 million dollar loan from Uncle Sam earlier than it is due. Tesla has come on strong with better-than-expected earnings that have caused its stock price to skyrocket over 40 percent this week. Underlying the positive news for these three automakers is the ongoing battle with Toyota (NYSE:TM) for global market dominance…
Considering the success of Tesla, part of that battle will be waged in California over the electric car market. Once the undisputed domain of Toyota hybrids, that territory has become a hotbed for competition in the growing green car industry. In that respect, the goals of the Advanced Technology Vehicle Manufacturing Program — responsible for the government loans to green car makers — have largely been realized.
Yet that does not mean the story of the bailouts will be written in black ink. Uncle Sam will get its loan money repaid from Tesla, Ford and other recipients (including Nissan Motors), yet the cost of GM and Chrysler’s bailouts will have to be considered investments in the country as a whole. With a resurgent U.S. auto industry the fruit of its labors, the project has to be considered a successful one. Uncle Sam will just have to be careful in how it sells off its final GM shares.
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