US govt ends bailout of GM; sheds final shares at loss

It was a risky calculation: in 2009, as the world was reeling from the worst financial crisis since the 1929 crash, newly minted President Barack Obama stepped in to save the US car industry.

On Monday, the US government ended its near-five-year run as stockholder in the country’s largest car manufacturer, saying it had sold all of its remaining 31.1 million shares in General Motors.

The government took a $10-billion loss, recouping step by step only $39.9 billion of the original $50-billion stock-purchase that bailed out GM.

But Obama reminded the world on Monday of what had been the greater risk.

“In the midst of what was already the worst recession since the Great Depression, another 1 million Americans were in danger of losing their jobs,” he said after the announcement.

He noted that two of Detroit’s “Big Three” – GM and Chrysler – were on the brink of failure and threatened to take down suppliers, distributors and entire communities.

“As president, I refused to let that happen. I refused to walk away from American workers and an iconic American industry,” he said.

The move provoked snide criticism from the conservative Republican camp, which started calling GM “Government Motors.” Republican Mitt Romney, whose father was once a top car industry executive and who challenged Obama for the White House in 2012, had opposed the bailout and said the market should decide – words that came back to haunt him in the campaign and helped Obama win.

But Obama’s decision to bail out GM just months after he entered office was an issue in 2010 that helped fuel voter backlash against Obama’s Democratic Party in congressional elections and helped put Republicans in the majority in the lower House of Representatives – a key factor in current Washington gridlock.

GM was forced into a painful bankruptcy, but has since emerged with a robust performance.

General Motors wasn’t the only company to benefit from the auto bailout. The Obama administration also rescued Chrysler from collapse with a direct loan, but forced it to sell a majority share to the Italian car maker Fiat in exchange for its help.

Both automakers have emerged from bankruptcy and are now profitable, and Chrysler repaid its loan in full “and more” by 2011, Obama noted.

Ford, the last of Detroit’s Big Three, managed to survive the recession without government intervention, and Obama noted that each of the Big Three “is now strong enough to stand on its own.

“They’re profitable for the first time in nearly a decade,” Obama said.

He noted that the industry has created more than 372,000 new jobs, after travelling a “long and difficult” road.

With the government’s sale of the final 31.1 million shares, “this important chapter in our nation’s history is now closed,” said Treasury Secretary Jacob Lew.

“The president understood that inaction could have cost the broader economy more than 1 million jobs, billions in lost personal savings, and significantly reduced economic production,” Lew said.

The government has been reducing its share in GM bit by bit, from the original 61-per-cent holding. General Motors returned to the stock market at the end of 2010.