As a result of the 2009 bankruptcy that was declared by General Motors during the major car industry crisis in America, the US Treasury has until now maintained shares in the company. On Monday, the Treasury sold its remaining shares, finally becoming disentangled from GM’s grasp.
Four years ago, the major car company was forced to declare bankruptcy. The Bush administration handed over the first $13.4 billion in December 2008 as part of the Troubled Asset Relief Program (TARP), a fund that was supposed to just bail out financial institutions. GM received additional loans after the Obama administration forced it to restructure – including a requirement to kill the Pontiac – and by July 2009, the government took a 61-percent stake in the new company when GM agreed to convert the loans into stock shares. In November 2010, GM returned to the New York Stock Exchange with the biggest initial public offering in U.S. history, although the Treasury still owned a third of it.
Monday’s sale cut a government lifeline that kept GM afloat for the past four years. The sale, the last of hundreds of daily trades the Treasury has made since January, netted $9.2 billion. The total loss to taxpayers: $10.5 billion.
But the $10.5-billion loss is only part of GM’s red ink. The Treasury doled out another $1.5 billion to GM suppliers and to support owner warranties, and is more than $8 billion deep in Ally Financial, GM’s financing arm formerly known as GMAC, of which it still owns 64 percent. GM is reportedly planning to sell its Ally shares within the month, but the Treasury is still stuck.
Both the Treasury and GM released statements claiming the auto bailouts saved more than a million jobs, while GM puffed that its own bailout saved the country $39.4 billion in potential lost tax revenue and insurance claims. Theoretical statements like these are convenient because they can neither be proved nor disproved. But while GM is now profitable, the company had to shutter more than a dozen assembly plants, cut contracts with more than 1000 dealerships and slash tens of thousands of jobs to get there—exactly what might have happened had GM gone through a regular bankruptcy without government support. In the opinions of many the amount “saved” by the bailout is inexcusable when considering the current $10.5 billion loss.
