The government is getting out of the auto business. The Treasury Department said Wednesday that it will sell its remaining stake in General Motors by early 2014. This marks the final chapter of a $49.5 billion bailout in 2009 that saved the auto giant.
Under the deal, GM will spend $5.5 billion to buy back 200 million shares from the Treasury before year's end. That will leave the government with 300 million shares, or a 19 percent stake, which it plans to sell in the open market during the next 12 to 15 months. Treasury received the stock when GM went public again in November 2010 and has held on to the stock while awaiting a better price; officials declined to answer why the government is selling now.
GM has made money for 11 straight quarters but there are signs of trouble. It has lost money in Europe for a dozen years, and its U.S. sales aren't growing as fast as competitors’.
Citi financial analyst Itay Michaeli says the earlier than expected government exit indicates that GM is confident in its cashflow outlook for next year, despite challenges in Europe. The stock rose nearly 7 percent to $27.18 Wednesday on news of the government’s plan. And several financial analysts raised their price targets, which now average $33.50.Associated Press