Due to falling stock prices, the US Treasury will lose $3 billion more than predicted on its wild ride with GM and the bailout.
In February, the Treasury predicted that it would be losing $21.7 billion dollars from the bailout. That figure has now jumped up to $25.05 billion, as GM’s stock prices fell from February by a rate of 15 percent—and another 8 percent since May.
Ultimately, the government spent $50 billion on bailing out GM, but has only recouped $37 billion so far. The U.S. still owns a 26-percent stake in GM, which has proved to be a rocky relationship: from a high of $27.34 in February, it sunk to its lowest stock price in 90 years in April—a dismal $18.80/share. Things have gotten slightly better: on Monday, GM’s shares closed at $20.49.
Currently, the government owns 500 million shares of GM. If GM’s shares double to $53/share, then the government could recoup its $27 billion. But until then, GM will have to work on its new product lineup—the Malibu hasn’t been getting stellar feedback, though the new Cadillacs and Buicks have—and sort out its marketing strategy to earn money the good ol’ fashioned way: through customer sales.
Source: Detroit Free Press