General Motors Company : US Treasury Needs Concrete Exit Plan for GM, Ally - Watchdog
07/10/2012| 11:39am US/Eastern
--Could take years for Treasury to sell stakes in companies, watchdog says
--Treasury says it will balance exiting as soon practicable and maximizing value for taxpayers
--Taxpayers invested more than $50 billion in GM and more than $17 billion in Ally
(Adds comment from Treasury in the fourth paragraph, background and additional comments throughout.)
By Jeffrey Sparshott
WASHINGTON--The U.S. Treasury should develop a concrete plan to sell off its holdings in General Motors Co. (GM) and Ally Financial Inc. after weaker markets have hindered efforts to sell off shares, a watchdog said Tuesday.
"Market conditions have slowed Treasury's progress. In addition, due to the enormity of Treasury's stake, it could take a number of years for Treasury to sell at or above break-even," Christy Romero, special inspector general for the Troubled Asset Relief Program, or TARP, said in remarks prepared for a House hearing.
The Treasury still owns a 74% stake in Ally, the former in-house financing arm for GM, and 26.5% of GM's shares more than three years after the federal auto bailout. The government plans to sell its shares but there is no definite timeline for doing so.
"As with all our investments, we'll continue to balance exiting as soon as practicable and maximizing value for taxpayers," a Treasury spokesman said.
Debate over the bailouts remains heated, and the still-controversial actions taken by the Bush and Obama administrations during the crisis are fodder for the presidental election campaign.
While the program hasn't been as costly to taxpayers as originally feared, the auto program is expected to end up with a net loss--the Congressional Budget Office estimates $19 billion.
Taxpayers invested more than $50 billion in GM and more than $17 billion in Ally to prop up the companies.
Treasury sold off part of its GM stake in a late-2010 initial public offering and has reduced its holding in Ally, though weaker share prices have led the government to hold off on any further big public sales.
"It is unclear how much taxpayers will recover from its TARP investments in GM and Ally Financial," Romero said.
Romero said Treasury would need to sell GM, for example, at about $52.39 a share to break even. The company's shares were trading around $20 each on Tuesday.
One option is selling below the break-even price. "Although that would result in taxpayers getting out of these investments more quickly, it would decrease taxpayer return," Romero said.
Write to Jeffrey Sparshott at firstname.lastname@example.org