Treasury Set to Exit GM Investment by Early 2014

The U.S. Department of the Treasury announced today that it intends to completely exit its investment in General Motors within the next 12 to 15 months. Dependent on market conditions, the move is part of the Treasury’s efforts to wind down investments in the Troubled Asset Relief Program (TARP).

Currently, Treasury holds 500.1 million shares of GM common stock. By yearend, Treasury will sell 200 million shares to GM at $27.50 apiece. The 300.1 million remaining shares will be sold by Treasury “in an orderly fashion” in the next 12 to 15 months, the announcement said, beginning next month following a pre-arranged written trading plan.

This is just another step in Treasury winding down TARP bank programs. Last week, it sold its final shares of AIG stock. Through repayments and other income, Treasury has recovered more than 90% of the $418 billion in TARP funds.

“TARP was always meant to be a temporary, emergency program,” Timothy G. Massad, assistant secretary for financial stability, said in the announcement. “The government should not be in the business of owning stakes in private companies for an indefinite period of time.”

Treasury invested $49.5 billion in GM in 2008 and 2009 to stabilize and restructure the automaker as part of the rescue of the U.S. auto industry during the recession. So far, including the stock sale expected by yearend, Treasury will have recouped $28.7 billion of its GM investment.

“This announcement is an important step in bringing closure to the successful auto industry rescue,” GM Chief Executive Dan Akerson said in a separate statement. “It removes the perception of government ownership of GM among customers, and it demonstrates confidence in GM’s progress and our future.”