Last Updated: February 25. 2011 1:00AM
Treasury planning early sale of GM shares
David Shepardson / The Detroit News
Washington — A top economic adviser to President Barack Obama said the administration is committed to quickly selling the government's remaining stake in General Motors Co., rather than wait to maximize taxpayers' investment.
Austan Goolsbee, chairman of the Council of Economic Advisers, said the government wouldn't delay the sale of its shares in hopes of getting a better return on its 33 percent stake in the automaker.
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"The writing is clearly on the wall that the government is getting out of the GM position," Goolsbee told reporters at a breakfast sponsored by the Christian Science Monitor. "The government never wanted to be in the business of being majority shareholder of GM. It was only to prevent a wider spillover, negative event on the economy. So we're trying to get out of that."
Last year, the government reduced its GM stake from 61 percent to 33 percent as part of the automaker's initial public stock offering. At GM's current share price, the government would lose up to $10 billion of its $49.5 billion GM bailout, started by President George W. Bush in December 2008.
Renee Rashid-Merem, a GM spokeswoman, said a decision about when the Treasury will exit the automaker is up to the government. "Ultimately, that's going to be their call when they sell their stock and at what price," she said. "Our focus is to grow shareholder value and to keep driving business results."
Goolsbee's comments came as GM's stock fell to its lowest level since the company went public in November, dropping as low as $32.05 Thursday before rebounding to close at $33.02, down $1.57 or 4.5 percent.
The price was dragged down in part by overall volatility in the financial markets amid unrest in Libya and rising oil prices. More than 63 million GM shares traded hands — nearly four times the normal volume.
GM shares took a hit even as the automaker reported a $4.7 billion profit for 2010, its first year in the black since 2004 and best performance since 1999.
Revenue was $135.6 billion for the year, helped by strong sales in North America. For the fourth quarter last year, GM reported net income of $510 million on revenue of $36.9 billion.
The government has recovered $23.1 billion of its GM bailout, and would have to sell its remaining shares at about $53 each to break even.
Some Wall Street analysts interpreted Goolsbee's comments as a sign the government would sell its shares quickly no matter the price.
Goolsbee said the administration would not engage in "market timing" to try to boost taxpayer returns by holding GM stock longer than necessary.
Some observers, including the Obama administration's former auto czar, Steve Rattner, have argued the government should hold the shares longer, waiting for the price to rise.
The Treasury "is just trying to — in whatever is the most reasonable way — phase out of the government's involvement," Goolsbee said. "We're not trying to be Warren Buffet and figure out what the market is doing."
The government's lock-up period expires in May, and the government could opt to sell its entire remaining GM shares this year.
Goolsbee declined to discuss his widely reported opposition to saving Chrysler during internal administration talks in March 2009.
President Barack Obama ultimately sided with others in the administration in agreeing to a bailout of Chrysler if it negotiated a tie-up with Italy's Fiat SpA.
"I am extremely happy to see the recovery of the U.S. auto industry," Goolsbee said. "It's certainly been a positive story to come out of Detroit."
Separately, Goolsbee said the administration was monitoring rising fuel prices, but said at current rates, he didn't expect it would harm economic growth or auto sales.
dshepardson@detnews.com
(202) 662-8735
From The Detroit News:
http://detnews.com/article/20110225/AUTO01/102250387/Treasury-planning-early-sale-of-GM-shares#ixzz1F0Jc4v7A
