Government Motors is now officially dead: really. The Canadian government announced it is selling its $2.7 billion stake in General Motors Co. to Goldman, Sachs & Co. by the end of this week.
The Canada GEN Investment Corp., a subsidiary of Canada Development Investment Corp., plans to sell its 73.4 million shares of GM in a single unregistered block.
The government received the shares as part of the 2009 bailout of the company, and more details about the sale will be available in the “next several days” after Canada GEN reports the trade with U.S. and Canadian securities regulators.
The sale will be converted to Canadian currency over a period of time and the push to sell is part of an effort by Canada’s conservative government leadership t balance its books in 2015-16. The government has maintained selling the stock has always been part of its plan.
While it was the U.S. government’s involvement that seem to garner most of the attention in 2009 courtesy of the $49.5 billion bailout, the Canadian and Ontario governments also made contributions totaling about $10 billion, including $4.8 billion from Ontario for GM and Chrysler.
The U.S. government gradually sold its stake in 2012 and 2013, taking about a $10 billion loss on the deal. In 2014, the Ontario government sold its 36.7 million shares that it received as part of Canada’s $10 billion bailout of GM. The Ontario Finance Ministry said the shares sold for $1.1 billion and money would go into a trust to help public infrastructure in Ontario.
However, there is a voice that is not entirely happy about the Canadian government selling its stake, suggesting it could use the stock to leverage more work at Canadian auto plants.
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“We need to utilize every bit of leverage we can to confirm GM’s manufacturing footprint in Ontario going forward,” said Unifor National President, Jerry Dias.
With all the current concern regarding GM’s future presence in Oshawa, the union is stressing that this is exactly the wrong moment for the provincial government to dispose of its equity stake.
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“While the provincial government’s decision is unhelpful, we remain confident that GM can have a strong future in Canada. If Canada wants to have a robust auto manufacturing industry, our governments must play a role.”
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Unifor, which is the former Canadian Auto Workers union, said there are plenty of examples of how government ownership equates to jobs in that country. For example, 20% of Volkswagen is owned by the state government in Lower Saxony, Germany, where many of its operations are located. Volkswagen has not closed a major German factory since the end of the Second World War, the union noted, adding that other governments in Europe and Asia have also used equity investments in automakers to support domestic activity.