Canada loses $800M Canadian in GM bailout
The Canadian federal government sold its nearly 73.4 million shares of General Motors Co. stock on Monday for about $2.61 billion, putting its losses likely around $800 million Canadian for its financial bailout support of the Detroit automaker.
Canada GEN Investment Corp., which held Canada’s equity interest in GM, sold its stake at $35.61 a share, according to a regulatory filing. The sale could net the Canadian federal government about $3.3 billion in Canadian dollars based on Thursday’s U.S. exchange rate.
Canada GEN Investment Corp. said Monday it would sell its 4.6 percent stake in GM in a block sale this week to investment bank Goldman Sachs & Co. But it said it would convert the U.S. dollars into Canadian currency “gradually over a period of time.”
The move ends nearly six years of government ownership into the Detroit automaker. Canada and Ontario helped bail out GM during its bankruptcy, giving $10.8 billion in Canadian dollars at the time, with the federal government providing $7.2 billion Canadian. The Canadian and Ontario governments at one point collectively held about 175 million shares of GM common stock. They also held preferred stock shares.
A Minister of Finance spokeswoman Thursday said the Canadian government has recovered $6.4 billion in Canadian dollars of its support to GM.
The U.S. government lost $11.2 billion on its $49.5 billion GM bailout. The U.S. sold its last shares in the company in December 2013, while Ontario sold its final stake in GM, 36.7 million shares, in February for $1.1 billion.
Ontario provided $3.6 billion in Canadian dollars to GM during the recession. The province received 58.4 million shares of GM stock as part of its support to GM. Ontario made $1.35 billion Canadian dollars on its sales of GM shares, which exceeded Ontario’s target of a $900 million gain, a spokeswoman confirmed. But the difference indicates a $2.25 billion loss.
“Ontario is already realizing a significant return on investment from its support for GM through hundreds of thousands of direct and indirect jobs retained, the accompanying economic activity and revenues that would otherwise have been lost,” Kelsey Ingram, spokeswoman for Ontario Finance Minister Charles Sousa, said in a statement. “The recession in Ontario would have been deeper and longer had we not acted.”
On Monday, Finance Minister Joe Oliver said that Canada’s investment in GM was meant to be temporary and that its share sale returns GM to private sector ownership.
Unifor, the Canadian union that represents 21,000 autoworkers including hourly workers at GM, was disappointed in the sale.
“It is remarkably short-sighted of the federal government to sell off its shares in GM at a time when there has been widespread agreement that securing GM’s future in Canada is critical,” Unifor National President Jerry Dias said in a statement.
GM is considering the fate of its Oshawa, Ontario, assembly plant and has said it won’t decide until next year on any new vehicle commitments or investments for the plant. Production of the Chevrolet Camaro is moving from Oshawa to GM’s Lansing Grand River Assembly Plant later this year; some analysts say the Oshawa plant is at risk of closure.
“The federal government is selling off its shares for short-term political gain, as it prepares its last budget before the next federal election. We need leaders with more vision, strategy and savvy than this,” Dias said. “This was an unwise and unhelpful move by the federal government. That said, we remain confident that GM can have a strong future in Canada because just as GM is good for Canada, Canada is good for GM. But at some point very soon, the federal and provincial governments are going to have to take decisive action to secure the future of GM.”
A GM spokeswoman has said the company will meet or exceed all mandates Canada required for receiving bailout funds, including launching five new vehicles in Canada and keeping at least 16 percent of North American production in Canada through 2016.
GM’s largest shareholder is the UAW Retiree Medical Benefits Trust, a voluntary employees’ beneficiary association. As of late February, it owned about 140.1 million shares, or 8.7 percent, of GM’s outstanding stock.