DETROIT (WWJ/AP) – General Motors, trying to clear the stigma of being partly owned by the U.S. government, will spend $5.5 billion to buy back 200 million shares of its stock from the treasury.
The government, in turn, promised to sell its remaining 300 million shares on the open market starting in January, and get out of the company’s business within the next 12 to 15 months.READ MORE: This Weekend: I-275 Lane Closures Continue Between 7 Mile Road And I-96/I-696/M-5
“This announcement is an important step in bringing closure to the successful auto industry rescue, it further removes the perception of government ownership of GM among customers, and it demonstrates confidence in GM’s progress and our future,” Dan Akerson, chairman and CEO of GM, said in a statement.
GM said Wednesday that it will pay $27.50 each for the 200 million shares, and it expects to close the deal by the end of the year. GM stock closed Tuesday at $25.49, and it shot up 7.1 percent in premarket trading Wednesday to $27.30.
The government got its shares of the company as part of a $49.5 billion bailout of GM that began nearly four years ago. The bailout saved GM from collapsing into financial ruin.READ MORE: WATCH: Girl Challenges Pittsburgh Police Officer And Former Pitt Football Player To Race
“A fortress balance sheet has been a pillar of GM’s financial strategy and has enabled us to undertake today’s actions. GM’s balance sheet will remain very strong, with estimated liquidity of approximately $38 billion at the end of 2012, following the closing of the share buyback,” Dan Ammann, senior vice president and CFO, said in a statement.
The move leaves the government with 300 million shares, which it pledged to sell “in an orderly fashion” within the next 12-15 months, subject to market conditions.
GM’s purchase of the 200 million shares still leaves the government about $21 billion short of breaking even on its investment. To break even, the government would have to get nearly $70 each for its shares.MORE NEWS: Michigan's Expungement Law Takes Effect On Sunday
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