General Motors headquarters. Photo credit: General Motors
Shares of General Motors (GM 0.39%) were surging over 3% in early trading after the U.S. Treasury Department said it expects to exit its position in Detroit's largest automaker by the end of the year. The previous plan called for the Treasury's exit to be by March 2014 and investors are clearly cheering the early exit.
"Treasury's investment in the American auto industry was part of President Obama's broader response to the financial crisis, and it helped save more than one million jobs," said Treasury Deputy Assistant Secretary Tim Bowler in a statement. "Had we not acted to support the automotive industry, the cost to the country would have been substantial -- in terms of lost jobs, lost tax revenue, reduced economic production, and other consequences. ... All three American automakers are now profitable, and more than 340,000 new auto jobs have been created since GM and Chrysler emerged from bankruptcy in 2009."
Today the Treasury announced it had completed the sale of 70.2 million shares of General Motors common stock and it would launch a final plan for its remaining 31.1 million shares. Although the early exit depends on market conditions and trading volume, the Treasury still expects to fully exit by the end of the year. GM shares closed yesterday at $37.69.
So far, the Treasury has recouped a total of $38.4 billion for taxpayers from the overall General Motors investment. But that leaves a shortfall of roughly $10 billion and the Treasury's exit alone may not be enough to quiet the "Government Motors" name-calling for some time. Still, this is a huge step forward for the new General Motors, which is rebounding from its ugliest chapter in history.
