By Daniel Harper
The American taxpayers stand to lose billions as General Motors today announced a plan to buy back 40 percent of the company owned by the federal government.
“The Detroit automaker said it will purchase 200 million shares of GM stock held by Treasury for $5.5 billion — or $27.50 per share — nearly $2 above the stock’s closing price on Tuesday,” the Detriot News reports.
However, the break-even price — the price that GM would need to pay for each share in order to pay back the money the government put in to the company —was $53 a share. That number has now risen dramatically.
“As a result of GM’s buy back, the government has recovered about $28.6 billion of its $49.5 billion GM bailout, which means it will most likely lose billions when selling its remaining shares,” MLive.com reports. “The government would need to sell its remaining shares at a price of $69.72 to break even. That’s up more than $15 from earlier this year, when the U.S. Treasury would have to sell its 500 million remaining shares at about $53 per share.”
GM, or “Government Motors” as some critics have called it, has continually been ridiculed due to the government ownership, which was the result of the auto industry bailout that began under President George W. Bush in 2008 and was expanded by President Barack Obama in 2009.
The U.S. Treasury initially owned nearly 61 percent of GM as part of the auto bailout, which forced the automaker and crosstown rival Chrysler through a government-backed bankruptcy.
The Obama administration completely exited Chrysler last year after recovering $11.2 billion of its $12.5 billion bailout to the Auburn Hills-based automaker.
And who’s footing the cost? The American taxpayer, of course.