General Motors (GM) and U.S. in Catch-22 Over 26.5% Stake
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General Motors (NYSE: GM) is looking to shed the moniker of "Government Motors" to the chagrin of the U.S. government itself.
According to the WSJ on Monday, GM offered to buy 200 million of the 500 million shares stake the U.S. Treasury has in the automaker. The Treasury took the position following a $50 billion infusion in 2009 to keep the auto giant alive following the global financial meltdown.
GM has said the Treasury's position -- which comes with certain restrictions placed on the company -- is hampering further growth. Aside from consumers potentially seeing GM as a weaker company with the Treasury's 26.5 percent holding, the Company is finding it challenging to recruit new talent given pay restrictions that are in place. Additionally, GM execs are also ticked about limitations on using corporate jets.
So, what's the solution? As of last Friday's closing price, the U.S. would lose about $15 billion on its investment. GM needs its share price to get to $53 for the U.S. to break even, though the Treasury said it might consider selling if the stock moves into the $30s.
That paints a catch-22 scenario: GM thinks it can't grow without the U.S. off its back, but the U.S. won't get off GM's back until the company grows.
The Treasury said it still has no plans to be a long-term holder of GM and it also wants to maximize shareholder returns. News comes as the U.S. just sold a massive portion of its AIG stake and also said its turned a profit on the investment.
GM shares are over 1 percent lower Monday morning.
According to the WSJ on Monday, GM offered to buy 200 million of the 500 million shares stake the U.S. Treasury has in the automaker. The Treasury took the position following a $50 billion infusion in 2009 to keep the auto giant alive following the global financial meltdown.
GM has said the Treasury's position -- which comes with certain restrictions placed on the company -- is hampering further growth. Aside from consumers potentially seeing GM as a weaker company with the Treasury's 26.5 percent holding, the Company is finding it challenging to recruit new talent given pay restrictions that are in place. Additionally, GM execs are also ticked about limitations on using corporate jets.
So, what's the solution? As of last Friday's closing price, the U.S. would lose about $15 billion on its investment. GM needs its share price to get to $53 for the U.S. to break even, though the Treasury said it might consider selling if the stock moves into the $30s.
That paints a catch-22 scenario: GM thinks it can't grow without the U.S. off its back, but the U.S. won't get off GM's back until the company grows.
The Treasury said it still has no plans to be a long-term holder of GM and it also wants to maximize shareholder returns. News comes as the U.S. just sold a massive portion of its AIG stake and also said its turned a profit on the investment.
GM shares are over 1 percent lower Monday morning.
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