Boston, MA, 11/22/2013 (wallstreetpr) – The U.S. Treasury department has finally confirmed that it is planning to sell-off the remaining stake in General Motors Company (NYSE:GM) by this year end, subject to “market” conditions. The treasury has already recouped $38.4 billion from the $49.5 billion that it had advanced to the company in 2009. This was part of the Troubled Asset Relief Program (TARP), to assist the company to exit from Chapter 11 bankruptcy filing. It is expected that the Treasury department will suffer a loss of $10 billion through its assistance. It had planned to exit by April 2014 but has preponed the exit looking at General Motors improved performance.
The stake sale is expected to unshackle the company:
- General Motors Company (NYSE:GM) will be able to offer better compensation and bonuses to its executives. This could come in handy if the company decides to search outside for a candidate to replace CEO Dan Akerson.
- The company will also be able to offer dividends and buy-backs
- Government had forced auto-makers to invest heavily in alternate fuel cars. These were non-performers and cost the companies heavily. Such electric and hybrid vehicles account for less than 4% of the total volumes in the U.S. despite government tax incentives and price wars.
- The government had also forced companies to slow down development and sales of bigger cars and SUV. SUVs are the real money-spinners as auto-makers have better margins on them. The popularity of such vehicles can be gauged from the fact that sales of such full-sized pick-up vehicles jumped 20% for the first nine months of this fiscal against a jump of 8% in the overall auto market in the U.S.
Auto sales expected to reach 15.5 million units for the full year with an 8.4% growth in October itself.
The balance stake sale from the Treasury is also expected to have a very positive effect on the valuation of the company. Stock of General Motors Company (NYSE:GM) was trading at $38.12, up by 1.14% yesterday. Volumes were also higher at 33.90 million against daily average of 19.41 million.
