"For [GM] to pay back everything it owes, it would have to sell its shares at $143 a share . . . where the highest value of a General Motors share ever was $43, $44, $46, whatever the dollars were . . ."
Jim Renacci on Tuesday, January 4th, 2011 in an interview on WCPN 90.3 FM
Rep. Jim Renacci's GM stock claim crashes on accuracy
In April 2010, General Motors announced it had paid back its government loans, in full and five years ahead of schedule. PolitiFact rated the claim as Half True.
GM had squared its government loans, but loans were only a fraction of more than $52 billion that the U.S. Treasury had committed to GM through the Troubled Asset Relief Program (TARP). Most of the government's GM investment was converted to an ownership stake in the General Motors Co., the new company that emerged from bankruptcy.
While several economists told PolitiFact the repayment was undeniably a sign of progress, the government's nonpartisan Congressional Budget Office projected the government would end up losing $34 billion in TARP money extended to the automotive industry and auto finance companies. The CBO didn't break out how much of that was tied to GM, but GM received the largest portion of the total $85 billion.
By last fall, however, the Treasury Department had revised its loss on the bailout downward, to $17 billion. Treasury officials declared the bailout a success.
But declarations of success, for the bailout or for GM, were not unanimous.
"I'm not sure we can determine one year later that General Motors is successful," Rep. Jim Renacci said on the "Sound of Ideas" on WCPN 90.3 FM. He said, "I think that for the company to pay back everything it owes, it would have to sell its shares at $143 a share . . . where the highest value of a General Motors share ever was $43, $44, $46, whatever the dollars were..."
PolitiFact Ohio asked the staff of the 16th District Republican about the underpinning of his numbers. They referred us to a blog posting that cited an analysis from last August by CNBC auto reporter Phil LeBeau, "which states that for the federal government to recover its current net TARP outlays of $43 billion, each (GM) share would have to yield about $143 for the government to be repaid."
That figure was cited by other reporters, too, about that time, as GM filed for an initial public offering (IPO) of its stock that was projected for October.
But events overtook the $143 estimate. GM kept altering several factors in its IPO, and by the time it occurred last November, analysts listed a payback figure in the low $50 range. (By then, CNBC had taken down the LeBeau’s posted analysis from its website.)
The government sold part of its 61 percent stake in GM during the IPO in November, raising $13.5 billion and reducing its share in the company to 33 percent. Treasury also swapped some secondary shares, bringing in another $2.1 billion.
Technically -- and it's an important financial distinction to make -- the automaker does not owe the government anything. GM repaid the government by giving it the bulk of its stock -- leaving it up to Treasury to get a good return on investment. Given the rest of his statement, we think Renacci was talking about the government breaking even on that investment, not GM repaying the government.
The government’s stake in GM stands at $26.4 billion. Divide that by Treasury's 500 million stock shares and you get about $53 a share -- the price Treasury would have get to break even on the bailout. The Congressional Oversight Panel lists the break-even price as $54.28.
Renacci's staff told us that the record high for GM shares was $40.85, even lower than the congressman stated, in 1999. But according to the Center for Research in Security Prices at the University of Chicago, and according to the oversight panel, GM's peak stock price was above $93 in April 2000.
Those figures are for the old GM that sought bankruptcy protection and reorganized. Stock prices for the new General Motors Co. closed at $36.70 on Feb. 7.
The senior Treasury official who oversees TARP told the Congressional Oversight Committee that the government hopes to sell the rest of its stake in GM within the next two years.
Financier Steven Rattner, who was dubbed the administration's "car czar" as head of the Presidential Task Force on the Auto Industry, thinks taxpayers still could break even if Treasury is a little patient" and holds its stock longer.
Selling the stock at recent non-peak levels, the government would lose around $7 billion on the entire GM bailout.
So where does that leave us?
Renacci relied on an outdated projection of the stock price needed for the government to fully recover its assistance to GM. The "break-even" price really is much closer to the current stock price than were initial projections. And Treasury's current loss level of $7 billion is less than half the $17 billion projected by Treasury last fall, when it declared the bailout a success.
And the congressman is way off the mark with his citation of GM’s highest-ever stock price.
Whether the new GM can be viewed as successful is a point we leave up for debate. But as to Renacci’s claim about GM stock and the government recouping its TARP investment, we rate the statement False.