It has been a landmark week for automaker General Motors (GM), as the company has not only seen major shakeups with its management of late but also big news regarding quite possibly its biggest investor – the U.S. government.
According to statements from U.S. Treasury Secretary Jacob Lew on December 9, the federal government has finally sold off its remaining shares of GM stock, returning the once-venerable manufacturer back into the hands of the American investor.
"With the final sale of GM stock, this important chapter in our nation's history is now closed," Lew said during a conference call with Fox Business News. However, while the government may no longer own any of the remaining stock in GM that it purchased as part of the Troubled Asset Relief Program (TARP), that doesn't mean this major event is truly behind us, as the repercussions of the government's bailout of the auto industry will likely be felt for years to come.
For instance, in order to move the troubled stock offerings off of the hands of the federal government and into the public's, the shares were sold at a much lower price than their estimated value, resulting in a total loss of roughly $15 billion. Under the conditions of TARP, which were ironed out in 2009 as GM and Chrysler both teetered on the brink of bankruptcy, the government handed over roughly $50 billion to GM to cover some of its debts and keep its workforce on the payroll.
In exchange for the massive infusion of government funds, GM handed over $2.1 billion in preferred stock and a 60.8 percent equity stake in the company. This led many critics of TARP to refer to GM as "Government Motors" following the acquisition, as such a blatant takeover of a major manufacturing body that dictates the fate of the national economy was unprecedented in a capitalist society. And although the government claims that the investments into Chrysler and GM have resulted in the creation of more than 370,000 new jobs, heavy government intervention is by nature restrictive of a company that once thrived in the free market.
"The U.S. Treasury's ownership exit closes just one chapter in GM's ongoing turnaround story. We will always be grateful for the second chance extended to us and we are doing our best to make the most of it. Today is not dramatically different from the hundreds of preceding days during which we have worked to make GM a company our country can be proud of again," GM Chief Executive Dan Akerson said in a statement.
While the company has arguably made what it calls a full recovery, there is no guarantee that it will be sustained. After all, no one had anticipated that the world's biggest automaker would be facing closure just a few decades ago. This is why it is best to shield your investments from harm by looking into asset protection to preserve your retirement and your current fiscal profile.