The US Treasury is eyeing all options for divesting its interest in the auto industry and is focused on a series of public offerings for General Motors, a government watchdog has said.
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The Government Accountability Office (GAO), the investigative arm of Congress, told lawmakers in a report on the Treasury’s role as investor in GM and Chrysler that the timing and method for selling its investments had not been determined, Reuters reported.
“Regardless of the option pursued, however, Treasury is unlikely to recover the entirety of its investment in Chrysler or GM, given that the companies’ values would have to grow substantially above what they have been in the past,” the report said.
Taxpayers spent over US$50bn in bailout and bankruptcy financing on GM and over $14bn on Chrysler earlier this year.
About half of the debt was wiped out in bankruptcy at both companies.
Treasury helped Chapter 11 restructuring last spring through its autos task force but has begun to wind down that operation to assume a less active role as investor, the report said.
The government received 9.85% equity in Chrysler, and 60.8% equity and $2.1bn of preferred stock in GM, and $13.8bn in debt obligations between the two companies.
“Treasury will oversee its financial interests in a hands-off, commercial manner,” the GAO reportedly said, noting Treasury has agreed with GAO’s conclusions and recommendations.
One key recommendation is that Treasury may need to re-establish contracts with outside firms to make sure sufficient expertise is available to oversee the government’s significant financial interests.
Jerry York, a former auto company executive and long-time industry adviser, told the Reuters Autos Summit in Detroit that the Treasury was going to keep an eye on General Motors as would any large investor.
“That’s the way it works. As long as things are going reasonably well, they’ll likely stay in the background.”
York said the Obama administration “nailed it” when they restructured GM and Chrysler. “They’ve put these companies in a situation where they now have a shot at survival,” he said, according to Reuters.
