Canadian Prime Minister Stephen Harper has orchestrated the sale of 73.4 million shares of General Motors that are valued at $3.3 billion in an effort to balance the country’s budget for the coming fiscal year. While oil prices have plunged globally, Canada has suffered economically. The sale of this stock will greatly aid in reducing the deficit that has grown in the country. Joe Oliver, Canada’s Minister of Finance, has explained that Canada’s purchase of this General Motors stock was always meant to be temporary and many agree that the auto industry giant is better received by the public as a private sector corporation.
Canada purchased the General Motors stock back in 2009 when the company was going through bankruptcy protection. At that time it was able to reduce a majority of its debt although most stockholders lost out on their investments. It has been reported that since this bailout occurred, General Motors has experienced 15 consecutive quarters of profits. From new products being sold in China and North America, an estimated $20 billion in net income has been earned. Also, $8.8 billion has been reinvested into facilities in the U.S. providing 3,000 new jobs increasing their total workforce to 80,000 employees within U.S. borders.
This sale of General Motor stock by Canada to the investment bank Goldman, Sachs & Co. is big business for both entities. Harper and the Conservative Ottawa government were aiming to earn $4 billion on the deal that began back in 2009 when the car company was drowning in debt. The total value of the shares does not meet this number but the exact amount of the sale has not been released. For General Motors, this sale means that the company has returned to the private sector. For some consumers, the partial ownership of the company by the government has casted a shadow over the industry giant calling them “Government Motors.” General Motors has explained they feel that for those who appreciate private industry production, this government ownership has deterred potential buyers from purchasing their vehicles.
The Canadian government originally invested $7.2 billion in General Motors. They have since earned back about $3.2 billion of that amount. Even if the sale does meet the estimated $3.3 billion value that has been placed on the taxpayer held stock, this will still leave Ottawa Government well short of their $4 billion goal. There is also the question of employment loss in Canada. This strategic move by the Conservative government to balance their budget may cost upwards of 7,000 jobs in Ontario. This factor has led many within the country to argue that Canada should retain the shares. However, Randall Bartlett, a TD Bank senior economist said Monday the timing of this sale of the works well for Canada and their fiscal agenda.
General Motors has been given the opportunity to re-acquire shares that it relinquished in 2009 to the Canadian government when it was faced with bankruptcy. The exact details of the sale have not been released but they should come very close to meeting Harper’s economic needs as Canada heads towards elections. General Motors has reported 15 quarters of profits which is good news for the manufacturing giant that was battling bankruptcy just a short time ago.
By Joel Wickwire
Photo by SenseiAlan – Flickr License
Photo by jm3 on Flickr – Flickr License