Taxpayers are expected to lose $10 billion on the deal unless General Motors (GM) can turn the government’s $1.2 billion stake into $11.1 billion, growth that would have GM trading at more than $350 per share, on par with elite companies, such as Amazon.
GM stock was trading at $38.11 per share on Friday morning following New York Times reports that the federal government plans to cut ties with the automaker by year’s end.
The government propped up GM with a $50 billion bailout in 2009 and helped it complete one of the fastest bankruptcy turnarounds in history. But what was sold to taxpayers as a win-win investment will turn into a loss of nearly $10 billion as the government rushes to pull out of the company, according to the New York Times.
"Barring a sudden jump in G.M.’s stock price, the government is on track to lose about $10 billion on its investment," the Times reported. "So far, it has recovered about $38.4 billion. By contrast, other rescue efforts, including the bailout of the American International Group, have generated profits for taxpayers."
The price tag on the auto-bailout has been steadily growing due to GM’s tepid growth, following its record-setting initial public offering of $33 in November 2011. On the eve of the 2012 election, taxpayers were only expected to lose several billion dollars.
Auto executives have been eager to cut ties with federal government as they look to move beyond the Government Motors stigma that bailout opponents ascribed to the company. This has proved especially troublesome amidst GM’s marketing push of its new line of pick-up trucks and Chevrolet Corvettes.
GM’s new lineup has earned near-universal praise from car experts—Car and Driver praised the Chevrolet Silverado’s "unimpeachable performance."
However, some customers have expressed disdain for the GM brand because of the bailout. More than half of Texas drivers—the largest pick-up market in the country—said the bailout would deter them from buying GM, according to an October poll.
That same month GM President Mark Reuss acknowledged that executives were eager to cut ties with federal government because they "know that the government ownership influence is highest among truck buyers."
"Being owned by the government is problematic for now," he said.