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Larry Summers: U.S. to recoup GM stake

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Larry Summers: U.S. to recoup GM stake

Outlook strong ahead of public offering this year

BY JUSTIN HYDE

FREE PRESS WASHINGTON STAFF

WASHINGTON -- The White House's chief economic adviser said Tuesday that the federal government could get "most, if not all" of the money it invested in General Motors back once the automaker offers shares to the public later this year.

The comment by National Economic Council director Larry Summers went beyond previous estimates by the Obama auto task force that the government would likely lose some of the roughly $50 billion spent rescuing GM, of which about $42 billion remains outstanding.

Summers' comments were backed up by an analyst estimate Tuesday that suggested that the new GM's equity could be worth between $75 billion and $78.5 billion. The U.S. government owns 60.8% of GM's equity, but the value of its stake will be affected by preferred shares and whether GM's old bondholders receive additional shares of the new company.

Auto profits are noted

The analysts with CRT Capital Group said GM's value could increase if worldwide demand for vehicles recovers faster than expected.

Speaking at a Brookings Institute summit on cities affected by the decline of the auto industry, Summers noted that GM and Chrysler were operating profitably.

"The prospects of repayment are brighter than they were a year ago," Summers said.

Earlier this year, the Congressional Budget Office estimated that the government could lose as much as $34 billion on the $85 billion spent rescuing GM, Chrysler and GMAC, but the estimate depended largely on the value of GM and Chrysler's shares.

The government also owns 9.9% of Chrysler. Obama administration officials have said it could take a number of years to sell off stakes in both automakers after they issue initial public offerings of their shares.

link:

http://www.freep.com/article/20100519/BUSINESS01/5190321/1331/Larry-Summers-U.S.-to-recoup-GM-stake

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