GAO: Government still faces hurdles in exiting auto companies

{mosads}To highlight that tension, the GAO pointed to the successful initial public offering of GM stock in November, when the Treasury sold over 400 million shares in the company for nearly $14 billion, generally exceeding analysts’ expectations.

However, for the Treasury to fully recoup its investment in both GM and Chrysler, it will need to be willing to wait for major growth in the value of those stocks, which could complicate attempts for a prompt exit.

To fully recoup its investment in GM, the Treasury would need to wait for GM’s share price to rise to over $54, as compared to the $33 it received from the IPO. And when it comes to Chrysler, its stock would need to climb “above historic levels” for the government to make its money back, the watchdog said.

“In divesting from the companies, Treasury may find its interest in exiting as soon as practicable at odds with the potential to increase taxpayers’ return by waiting for the remaining shares to rise in value,” the GAO wrote.

The group also noted that while the government rescue benefited communities where the companies continued to operate plants, it did not aid areas where plants had work suspended or shut down completely in the drive to return the companies to profitability. To aid in that transition, the government did set up an office devoted to helping communities once reliant on automotive work.

However, the GAO reported “mixed views” on the results of that group in the communities it was designed to help, and noted that the office has failed to demonstrate the results of its work.