Democrats on the campaign trail often pointed to the benefits of the taxpayer bailout of General Motors. The latest Bloomberg Businessweek reminds us that the truth was not as positive as politicians suggested.
Now comes the hard part for his administration: unloading the government’s stake in the company. While taxpayers have recouped $24 billion of the $51 billion pumped into the failing automaker in 2009, the federal government still owns 32 percent of the company, and shares are trading at less than half the $53 price Washington needs to break even. Taxpayers are looking at a loss—$14.4 billion at Nov. 14’s closing price—yet selling could be good for GM’s image and its stock.
With the automaker on track to lose as much as $1.8 billion in Europe this year, China’s growth slowing, and the U.S. economy stuck in low gear, prospects are dim for a doubled stock price. “They can’t wait for the shares to turn a profit because they know it’s not going to happen,” says Phillip Swagel, assistant Treasury secretary for economic policy under President George W. Bush. “They will wait a reasonable time period after the election, as people focus on the fiscal cliff and tax reform. Then they’ll start to sell off the shares.”