Feds expected to start selling stake in GM

DETROIT -- With the presidential election in the rearview mirror, the Obama administration should soon begin unloading its stake in General Motors.

That's the view of some analysts, who believe that the government's loss on its GM investment won't be as politically damaging now that President Obama has won a second term.

"We believe that the U.S. Treasury is likely to begin selling down its stake in GM shortly after the election," Barclays analyst Brian Johnson wrote last week in a note to investors.

That would be welcome news for GM executives, who are eager to shed the Government Motors moniker that was hung on the company during its 2009 government-led bailout. Aside from the stigma, GM has complained that the Treasury's limits on executive compensation have hamstrung the company's recruiting efforts.

The federal government still owns 32 percent of GM's common shares, or about 500 million shares, which it received in exchange for the 2009 bailout. For the government to break even on its investment, GM shares must rise to about $53 a share. Last week, the shares traded at around $25.

Analysts also predict that GM will use its cash stockpile to buy some of the government's shares. GM stoked that speculation last week when it more than doubled its revolving credit facility, to $11 billion.

GM said only that the credit provides "backup liquidity and financial flexibility." Analysts say the company could use it to buy some Treasury shares and possibly to pay for European restructuring costs or to buy the automotive operations of Ally Financial in Europe or Latin America.

"A decent portion of the financing that the company has been lining up is probably aimed at trying to work with the government to buy back a portion of its stake," Emmanuel Rosner, an analyst at Credit Agricole Securities in New York, said.

Rosner expects GM would spend as much as $5 billion of its cash to buy back Treasury shares. As of Sept. 30, GM had $32.6 billion in cash and marketable securities

A GM spokesman said, "The decision about how and when to sell the government's stock in GM is the Treasury Department's alone." A Treasury spokesman declined to comment.

Barclays' Johnson believes that the Treasury will unveil plans for a gradual sell-down of GM's shares, similar to how it has been unwinding its stake in insurance giant AIG, which also was bailed out.

He estimates a GM buyback of 40 percent of Treasury's shares, or about $5.6 billion, would boost the value of the remaining shares by 12 percent.