|US Treasury loses US$10b on GM shares
The US Treasury sold its last shares in General Motors Monday, ending the dramatic rescue of the auto giant at the height of the financial crisis five years ago.
The Treasury took a loss of more that US$10 billion on the US$49.5 billion bailout, but said that saving the US auto industry, the jobs of millions of auto workers and the pensions of many retirees was worth it.
The 2008 rescue, highly controversial at the time, “helped stabilize the auto industry, and prevent another Great Depression,'' Treasury Secretary Jacob Lew said.
He said that US President Barack Obama “understood that inaction could have cost the broader economy more than one million jobs, billions in lost personal savings, and significantly reduced economic production, AFP reports.
In late 2008 the administration of then-president George W. Bush began the rescue of the industry which was then expanded into a comprehensive program by his successor Barack Obama. It was attached to the massive Troubled Asset Relief Program set up to rescue banks.
The government took financial control of both GM, the largest US automaker, and Chrysler.
The number two producer, Ford, opted to stand on its own.
Treasury officials said the bailout of GM and Chrysler, which it exited earlier with the sale of most of its shares to Italian carmaker Fiat, would leave it with a net loss of about US$15 billion.
In addition, the government also took over GM's finance arm, now bank holding company Ally Financial, which the government still controls.
In a new study, the Center for Automotive Research said the government's loss was paltry compared with the losses risked by letting GM and Chrysler go under.
Not including the potential impact on the parts sector, the study said the US government “saved or avoided the loss of US$105.3 billion in transfer payments and the loss of personal and social insurance tax collections – or 768 percent of the net investment,'' the study said.
“Additionally, 2.6 million jobs were saved in the US economy in 2009 alone and US$284.4 billion in personal income saved over 2009-2010.''
General Motors chairman and chief executive Dan Akerson expressed gratitude Monday for the government support.
“`The US Treasury's ownership exit closes just one chapter in GM's ongoing turnaround story. We will always be grateful for the second chance extended to us and we are doing our best to make the most of it,'' he said in a statement.