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Obama, Geithner praise GM IPO


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Obama, Geithner praise GM IPO

David Shepardson / Detroit News Washington Bureau

Washington — President Barack Obama and Treasury Secretary Timothy Geithner heralded GM's public offering — but sidestepped the government's losses on its larger-than-expected sale of stock.

The Treasury will sell up to 45 percent, or 412 million shares, of its holdings. It formally sold 358 million shares on Wednesday for $33 each - incurring a $3.8 billion loss. It will need to get at least $50 a share on average for the rest of its shares to break even on the government's $49.5 billion GM bailout.

Obama said GM's IPO "marks a major milestone in the turnaround of not just an iconic company but the entire American auto industry."

He noted the "the government will cut its stake in GM by nearly half, continuing our disciplined commitment to exit this investment while protecting the American taxpayer."

Obama's statement made no mention of taxpayer losses.

Last month, the Treasury Department reduced its forecast of total losses on the $85 billion auto industry bailout to $17 billion.

By year's end the government will have recouped $23 billion of its GM bailout if it sells the full 412 million shares. It can't sell any more shares for at least six months.

Obama said "supporting the American auto industry required tough decisions and shared sacrifices, but it helped save jobs, rescue an industry at the heart of America's manufacturing sector, and make it more competitive for the future."

Geithner said the bailout saved American jobs.

The IPO "is an important step in the turnaround of the company and for our work to recover taxpayer dollars and exit this investment as soon as practicable," he said. "It is now widely recognized that the taxpayers' investment not only helped save jobs during the worst economic crisis in a generation but also gave the auto industry a solid foundation on which to build."

The Detroit News reported that Geithner ultimately decided to sell more shares than previously proposed — after reviewing a series of options.

Obama was briefed Tuesday by his top economic advisers on the GM IPO — one of several topics covered during a 45-minute session.

Geithner had been lobbied personally by then-GM CEO Edward Whitacre Jr. at a meeting in April to sell the government's entire stake in one fell swoop - something the government rejected.

Some government officials are nervous that if GM's stock rises too fast on Thursday during its opening day of trading that critics may say that sold too cheaply — and cost taxpayers some of the money they could have recouped.

Some of the government's shares were acquired by sovereign wealth funds, while China's SAIC Motor Corp. has been in talks to acquire about $500 million in stock. Treasury officials declined to identify any of the foreign entities that acquired GM stock and didn't address criticism that the GM underwriters didn't do more to open the IPO to small investors .

Senior administration officials said it would continue to monitor GM - "albeit it at a somewhat reduced level." The Treasury - which has been actively engaged for months in determining how many shares to sell will return to its "pre-IPO mode."

From The Detroit News: http://detnews.com/article/20101123/AUTO01/11230445/Obama--Geithner-praise-GM-IPO#ixzz16AIaL0lF

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