GM Bids For Ally Assets
|   Wednesday, August 22, 2012
Seeking help to repay its own federal bailout aid, auto lender Ally Financial collaborated with General Motors which as many of you know is partly owned by the US Treasury; it is looking to buy international operations from the auto lender as right now GM has the money to pursue such an acquisition. At the end of the second quarter GM had almost 33 billion dollars in cash and marketable securities. This has left some analysts and investors debating on whether that would be the best use of cash, with a few preferring a stock buyback or dividend payment.


Large banks have paid back the bailouts they received from Treasury, since the financial crisis, but the latest moves by GM and Ally Financial (formerly the automaker's finance arm) show how the bailout of the US auto industry is taking longer to wind down.

On the campaign trail as President Barack Obama and Republican rival Mitt Romney, the bailout remains a hotly debated topic as the efficiency and ultimate cost of the program are being questioned.

For now GM has said its focus is on investing in vehicle development, ensuring it has enough money to fix problems like losing money from its European unit, reducing its exposure on pension obligations, as well as making acquisitions. Still on that not is paying back shareholders, but no timetable has been given for that opportunity.

The government would balance exiting its stakes in GM and Alley as soon as practicable with maximizing value for taxpayers.
According to Autonews, government officials have never put pressure on GM executives when it came to business decisions and treasury has not expressed a view on the buying of Ally's assets.

Now, the treasury would need to sell its remaining 500 million shares of GM for more than 52 dollars each for break-even on the bailout. It's a long way to go from the modest 21 dollars they trade now. That's even lower than the initial public offering price of 33 dollars in the fall of 2010.

On the other hand, GM's bid for Ally assets was a somewhat reasonable use of cash. In May, Ally Financial, which is 74 percent owned by the Treasury after a series of bailouts, said it was selling operations in Europe, Canada and Mexico in an effort to speed up payment to US taxpayers. The automaker was not actively looking to buy all of Ally's international operations, but GM has not specified yet what assets it is aiming for.

Before the year is over, Ally Financial hopes to complete the sale of its international businesses. It is expected to move on to the next round of bidding by the middle of September. The majority of the 30 bidders are banks, based mostly outside the United State.

Upon successful completion of those goals, Ally expects to have returned a total of two thirds of the taxpayer's investments. In total, the US government pumped 17.2 billion dollars into Ally.

Comparatively, Ford Motor Co. has initiated a dividend, paid back a sizeable chunk of debt as well as reached an investment-grade credit rating by two of three major agencies. That translates into a more successful recovery than GM is experiencing.
PHOTO GALLERY
Comments:
Name required * Email required Email not valid *
Comment required *

Latest news
Sunday, August 19, 2018 10:30:31 Nissan is present at the Detroit Auto Show with a compact concept SUV called...
Saturday, August 18, 2018 10:25:17 Another Hyundai premiere at the Detroit Auto Show is the new Veloster N,...
Friday, August 17, 2018 10:20:24 The South Koreans from Kia presented at the Auto Show in Detroit the new...
Thursday, August 16, 2018 10:15:59 After a massive promotion campaign, the US subdivision of Hyundai has officially...
Wednesday, August 15, 2018 10:05:55 Acura boasted that the new RDX is 100% made in the United States and is...
Tuesday, August 14, 2018 09:54:10 At the core of the new VW Jetta is the MQB platform, which is already used...
Tuesday, August 14, 2018 09:50:38 General Motors held the world premiere for the new generation Chevrolet...
Monday, August 13, 2018 09:45:39 The Ram Trucks brand, currently belonging to Fiat Chrysler Automobiles,...
Sunday, August 12, 2018 09:39:52 Ford brought the new generation mid-size Ranger pick-up at the Detroit Auto...
Saturday, August 11, 2018 09:34:13 At the Auto Show in Detroit, American car manufacturer Ford celebrates the...