US President Barack Obama has held up the wildly successful return of General Motors to Wall Street as a vindication of his government’s much-criticized economic policies.
“Today, one of the toughest tales of the recession took another big step towards becoming a success story,” Obama said shortly after GM completed its first day on the stock market in 18 months.
Amid GM’s skyrocketing debt and plummeting sales, Obama forced the company into bankruptcy protection in June 2009, while taking the deeply unpopular decision to up the company’s bailout to almost 50 billion dollars.
But on Thursday, fresh from a bruising electoral defeat which saw Obama’s congressional allies lambasted for backing bailouts that left the government as GM’s majority shareholder, the president claimed victory.
“Last year we told GM’s management and workers that if they made the tough decisions necessary to make themselves more competitive… then we would stand by them.”
“And because they did, the American auto industry — an industry that’s been the proud symbol of America’s manufacturing might for a century; an industry that helped to build our middle class — is once again on the rise.”
Through the sale, the government will slash its stake in the company from 61 percent to as little as 33 percent, recouping 11.7 billion dollars for US taxpayers.
Obama pointed to GM’s rise from the ashes as proof his policies could work across the broader US economy, which is still struggling under the weight of high unemployment and tepid growth.
“We are finally beginning to see some of these tough decisions that we made in the midst of crisis to pay off, and I’m absolutely confident that we’re going to keep on making progress,” he said.
GM’s owners will hope that kicking the government out of the driver’s seat will help the beleaguered firm reclaim its place in the panoply of storied US companies.
“Going public is an important milestone on our way to being a new and different and better GM,” said chief executive Dan Akerson.
Akerson, who earlier rang the opening bell on the New York Stock Exchange to the sound of a revving engine, said the shares were almost seven times oversubscribed.
Amid strong investor demand, the Detroit, Michigan-based firm priced its shares at 33 dollars a piece before the stock market opened, a sale that could net as much as 23.1 billion dollars across all stock classes.
By the end of the day’s trade the share price rose 3.6 percent to over 34 dollars a piece.
“If GM can sell cars as well as they sell stocks, they’ll be in good shape,” said Edmunds.com’s Jeremy Anwyl.
But with passions still high over the bailout, GM tried to allay concerns that chunks of the firm were sold off to foreign buyers, despite the US taxpayers role in saving the company.
Nearly four billion dollars worth of shares were allocated to retail investors, “which would be the biggest retail IPO in history,” said GM chief financial officer Chris Liddell.
“There was so much interest here in North America that something like 90 percent plus were allocated here in North America.”
GM’s partner in China, Shanghai Automotive Industries Corp (SAIC), snapped up a nearly one percent stake worth 500 million dollars.
Although the final value of the sale may not be known for weeks, strong-demand clauses could send it beyond the current IPO record of 22.1 billion dollars set by the Agricultural Bank of China in July.
The sale is already on target to beat the 19.7-billion-dollar listing of Visa in 2008, which is the current US record.
But it will be a while before the government is out of the picture completely.
Washington would need to sell the remainder of its shares at upwards of 50 dollars a piece to recoup taxpayers money in full.
Obama indicated that the government now expects to recover most of the taxpayers his administration pumped into the company.
How fast and to what degree the government gets its money back is likely to depend on GM’s share performance over the coming months. But it is clear both parties would like the link to end.
“I think this is clearly a marriage of convenience,” said Jaime Ardila, president of GM South America.
He added the relationship was like people who “marry a US citizen just to get a Green Card, but as soon as they do, they’re both very eager to break up.”