U.S. Set to Sell Last of Its GM Stake

After five years, four chief executives, and one of the largest bankruptcies in U.S. history, the government is poised to sell its remaining stake in General Motors Co.

The move will close the books on--but not the debate over--one of the largest and most politically contentious interventions by the government into American corporations.

The Treasury Department on Thursday said it planned to sell its remaining 31.1 million shares in the Detroit auto maker by year-end, the final step in winding down the 61% stake it took with taxpayer money at the height of the global financial crisis.

In the final tally, the deal will have cost taxpayers about $10.4 billion, based on the company's current $38.12 share price. The U.S. so far has recouped $38.4 billion of the $50 billion initially invested and the coming sales would raise another $1.2 billion at the current share price.

Proponents say the benefits of the bailout can't just be measured in dollars, and should take into account companies and communities that were saved from possible collapse. The U.S. auto industry has recovered nearly all of the jobs lost since the beginning of the financial crisis, is broadly profitable and is expanding again.

The intervention changed the relationship between government and American business, upended bankruptcy protections for bondholders and gave labor a significant stake in the company. Finally, it left unanswered questions about what could happen the next time a major U.S. industry nears collapse.

But many analysts believe the intervention helped save 10s of thousands of jobs at G.M., Chrysler Group LLC, U.S. auto parts makers, and even Ford Motor Co., which didn't receive bailout funds.

The rescue was part of a chain of government infusions to arrest the financial crisis. The government profited from its bailout of U.S. banks, but won't fully recover its aid to the auto industry.

Asset sales have helped the U.S. recoup $12.23 billion of the $16.29 billion it invested in GM's GMAC finance arm, now called Ally Financial Inc., which is still majority owned by taxpayers.

For G.M., Treasury's divestment will make it much easier for the company to reinstate a dividend and select a new chief executive with greater freedom to pay market compensation, which the government has restrained for several years. As a condition of the bailout, Treasury got approval over pay for the five most senior executives and the 20 next most highly paid employees at the company.

"GM people can't wait to get government people out of their knickers," said Gerald Meyers, former chairman of American Motors and a professor at the University of Michigan. "It has been demoralizing to management."

Many auto suppliers that rely on the Detroit Three would have collapsed if the rescue didn't occur, analysts believe.

Detroit's auto makers are now leaner and healthier, but they face a continual battle with foreign rivals to hold market share in the U.S., and challenges establishing their brands in fast-growing economies, especially China, now the world's largest single auto market.

"While the U.S. Treasury's equity stake draws to a close, our work to transform GM continues," the company said in a statement. "We're making great progress in our efforts to make the most of this second chance by building outstanding cars and trucks, creating jobs and reinvesting in our country."

According to the Bureau of Labor Statistics, 822 million people now work in motor vehicle and vehicle parts manufacturing. That is the same number as in October 2008, and up from a recent low of 624 million people in June 2009, when GM filed for bankruptcy.

GM's descent began in the middle of the last decade. At the time, it made almost all of its profits on trucks and sport-utility vehicles and made little or lost money on cars, in part because of high labor and health care costs for union workers and retirees. When gasoline prices rose and truck sales slumped, GM racked up nearly $70 billion in losses between 2005 and 2008. Then the financial crisis hit and auto sales plunged.

The Bush administration in December 2008 moved to stabilize the faltering companies with taxpayer money, and the Obama administration grabbed the wheel in early 2009.

The latter's auto task force, led by top White House and Treasury economic officials, took steps to wipe out shareholders, force out then-chief executive Rick Wagoner, and steer the company through a rapid 40-day bankruptcy.

In addition to overhauling the management team, the task force under financier Steven Rattner pushed for other changes that led to 2,000 dealers being dropped from G.M.'s sales network and plant closures across the industrial heartland. The company emerged leaner, promoting just four brands--Chevrolet, Cadillac, Buick and GMC--and has posted annual profits since 2010.

"The company was saved, the jobs were saved and the cost of the taxpayers was very minimal in context of the economic damage that would have occurred if the company liquidated," Mr. Rattner said.

The bailout led politicians and consumers to deride the company as "Government Motors," and in his presidential campaign in 2012, Republican candidate Mitt Romney criticized Mr. Obama's handling of the rescue.

The government used the bailout to exert enormous pressure on how the company was restructured.

Among the winners was the United Auto Workers union and its members. The bankruptcies created hardship for union workers, but they were able to salvage pensions and some share of their retiree health benefits, through the funding provided to the health-care trusts created for union retirees.

The U.S. pressured the UAW to renegotiate contracts and give up benefits such as the JOBS Bank, which kept laid off workers on payroll and encouraged over production. But the UAW on the whole made out better under the government-run bankruptcies than they might have otherwise.

"It's the old story: he who pays the piper calls the tune," said Arthur Wilmarth, executive director of George Washington University's Center for Law, Economics and Finance. "For GM, the government was the only one with money, and they were quite precise about how they would allow their money to be used."

For the administration, the costly gamble paid off. During the campaign, Mr. Obama took credit for the company's revival and he won support in manufacturing-heavy states like Michigan, Ohio, and Pennsylvania, which helped his re-election.

Five years after Congress created the $700 billion Troubled Asset Relief Program as a sort of financial crisis fire extinguisher, Treasury is still trying to exit some of its thornier investments.

In total, the government has received $431.4 billion on the $421.6 billion it invested in banks and auto companies, a figure that includes interest payments. The Treasury sold its $12.4 billion stake in Chrysler in 2011, with a $1 billion loss. The company is now majority owned by Fiat SpA.

Neal E. Boudette and Eric Morath contributed to this article.

Write to Jeff Bennett at [e-mail], Eric Morath at [e-mail] and Neal E. Boudette at [e-mail]

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