U.S. Goverment Unlikely To Recover Investment From GM

June 30, 2009

(ChattahBox)–As General Motors continues to reorganize its way out of bankruptcy, some are wondering if the U.S. government would ever see a return on its substantial investment in the automaker.

The government is expected to award GM with an additional cash infusion of $30 billion to ensure the automaker can emerge from bankruptcy a leaner and meaner company.

The U.S. government would eventually receive about a 60 percent stake in the company in exchange for its hefty cash investments. However, whether that 60 percent stake would provide the government with a repayment on its loans to GM is open to debate.

Analysts say that for that to happen, the value of GM’s stock would need to reach levels above $68 billion, which it has never done, even in good times. The highest level of GM’s stock only reached $56 billion in 2002.

Still, the government and GM officials are hopeful that internal forecasts are accurate; predicting a rapid rise in the equity value of the beleaguered automaker from $59 billion to $77 billion over the next three years.

Once GM is able to dispose of its overwhelming debt load through the restructuring process, the company may indeed rise again from the ashes like a phoenix.



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