Washington — A government audit Tuesday said General Motors Co. has shown increasingly positive results, but questions remain about its competitveness.
The Government Accountability Office — which issues audits on companies that received significant assistance under the $700 billion Troubled Asset Relief Program — said the Detroit-automaker had improved since 2008, but it still raised concerns.
“Although GM’s financial performance has improved significantly since the company initially received federal assistance, questions remain about competitiveness and costs,” GAO said.
The Treasury received a 61 percent stake in GM in 2009 as part of its $49.5 billion bailout of the Detroit automaker.
The report said Treasury in September “had projected approximately at least a 19 percent loss on its GM investment.” That’s in line with a report released Tuesday from the special inspector general overseeing TARP that said Treasury had booked a $9.7 billion loss on the sale of 811 million of its 912 million GM shares. The report cited a Oct. 3 phone call with Treasury.
Treasury’s assistant secretary overseeing the Wall Street and auto bailouts, Tim Massad, told GAO that “we still expect to complete the exit from GM by the first quarter of 2014.”
The inspector general’s office said the government would need $147.95 to break even, while the GAO says the government would have to get $156 a share. GM stock closed Tuesday at $36.06, up 0.7 percent.
GM spokeswoman Heather Rosenker noted the GAO had found the automaker had been making significant progress. “Today’s GM is helping lead a resurgent auto industry that is creating new investments and jobs in America’s economy. We appreciate the acknowledgement of our substantial progress which is the result of producing cars and trucks that customers love. That’s why we remain the market share leader in the U.S.,” she said
The GAO said GM’s sales have risen 15 percent in North America from 2010 to 2012, while overall, North American vehicle sales increased more than 23 percent. “GM’s North American market share generally has declined,” the report said. “In 2008, GM reported capturing 21.5 percent of the North American market, compared with 16.9 percent in 2012. GM reported that its North American market share was 17.2 percent through the second quarter of 2013.”
The report also said GM’s 2015 contract negotiations with the United Auto Workers will be crucial. “GM’s ability to remain competitive will also depend on its ability to continue to control costs, in particular its labor costs. Labor costs refer to the costs that GM incurs to pay workers to build its vehicles at factories in the United States and elsewhere. Through its restructuring, GM lowered labor costs, in part by reducing its workforce and making more efficient use of its remaining workers,” the report said.
Separately, the report also said Detroit-based lender Ally Financial Inc., which is 74 percent government owned after receiving $17.2 billion in bailouts “has stabilized.” But the report noted the auto lender “faces growing competition in both consumer lending and dealer financing from Chrysler Capital, GM Financial, and other large bank holding companies.”
In August, Ally reached a deal with the U.S. Treasury to repurchase nearly $6 billion in preferred stock. The move should help the lender launch a public offering.
“We appreciate GAO’s perspective on the substantial improvement made at the company,” spokeswoman Gina Proia said. “Ally has made tremendous progress in transforming the company and strengthening its financial profile.”
Ally is raising $1 billion to strengthen its balance sheet, after it failed in March to pass the Federal Reserve’s “stress tests” designed to ensure that banks have enough capital to weather a major economic downturn. It filed a new plan last month.
On Tuesday, Ally said it reached settlements with Federal Housing Finance Agency and the Federal Deposit Insurance Corporation — as receiver for certain failed banks — for all pending litigation and related claims. Ally said it will record a charge of $170 million in the third quarter in connection with the settlements.
“These settlements are key steps in Ally addressing its remaining legacy mortgage risks,” said Ally CEO Michael Carpenter. “We are pleased to be able to put these matters behind us and continue to focus on our leading automotive finance and direct banking operations.”
The company had put a planned initial public stock offering on hold in 2011. It has been working to resolve claims from creditors of its bankrupt mortgage unit. Earlier this year, Ally agreed to pay $2.1 billion to resolve claims from creditors of its Residential Capital LLC unit to complete its bankruptcy restructuring. ResCap expects to exit bankruptcy by the end of the year. A hearing to confirm the ResCap chapter 11 plan is set for Nov. 19.