Detroit: The US treasury department has hired JPMorgan Securities and Citigroup Global Markets Inc. to sell its remaining stake in General Motors (GM) and bring an end to almost four years of partial US government ownership of the car maker.
The government, which got its stake in a $49.5 billion bailout of the company in 2009, still holds 300 million shares of GM common stock, giving it 19% of the auto giant.
Treasury officials revealed hiring JPMorgan and Citigroup on Wednesday in documents posted on the department’s website. The banks will get one cent for every share they sell for a fee of up to $3 million.
The documents gave no timetable for sale of the remaining shares, but the government has said it intends to be out of GM by early next year. Contracts with the two banks run through 14 January 2014, but can be extended in 90-day increments or through mutual agreement.
Extensions can’t go longer than 14 January 2017. When the stock is finally sold, it will end a sad chapter in GM’s history. The company nearly ran out of cash in 2008 and needed government money to survive a trip through bankruptcy reorganization.
Since then, GM has posted 11 straight quarters of profits, piling up $16 billion in net income. Last month, the company bought 200 million of its shares from the government for $5.5 billion.
The bailout has rankled many taxpayers who thought the government shouldn’t have interfered with the company’s business. Some still call GM “Government Motors.”
US President Barack Obama, who was responsible for engineering much of the bailout, touted his role in the 2012 presidential election, saying it saved 1 million jobs and prevented the collapse of America’s auto industry. GM has said that once the shares are sold, it expects its sales to increase. Some people have refused to buy GM cars and trucks as long as the government owns a stake.
The government is still $21.5 billion in the hole on the GM bailout. Breaking even would require selling the remaining 300 million shares for an average of about $70 each—more than double the current trading price.
The treasury department has held the stock for more than two years, awaiting a better price. GM shares sold for $33 each when they began publicly trading again in November, 2010.
The shares rose shortly after the sale but fell dramatically early this year as the US economy slowed and Europe headed toward recession. Then, a strengthening US auto sales recovery and the stock buyback pushed the price back above $30 for a time.
GM shares closed down $1.29, or 4%, at $29.31 on Wednesday.