GM share sale shows revival of auto industry as economic pillar

Article by Anita Panait, on June 8, 2013

The auto industry was once considered a pillar of economic growth in the United States. But that changed in 2009 when the industry suffered a heavy financial blow and succumbed to a near-collapse, highlighted by the bankruptcy of General Motors and Chrysler Group. Recent events, however, signaled the revival of the local auto industry to once again become a pillar of US economic growth.

One of these events is the decision of the Obama administration to dispose more of its stake in General Motors Co. The US Treasury Department recently announced a plan to sell around 30 million GM shares, which consummation would reduce the federal government’s stake in the carmaker to less than 15 percent.

This event is further boosted by GM’s return to the Standard & Poor's 500 Index for the first time since its 2009 bankruptcy. GM investors and owners are set to be updated on the carmaker’s progress its annual shareholders meeting in Detroit on June 6, 2013.

George Magliano, senior economist at IHS Automotive, remarked to Bloomberg that the "auto industry is alive and well," noting that one of the leading industries in the recovery is the auto industry.

According to data from the Commerce Department, carmakers in the US accounted for 14 percent of the 2.1 percent average rate of growth for gross domestic product during the revival that commenced in the third quarter of 2009.

Carmakers are set to post to their best sales figures this year since 2013. GM, Ford and Chrysler all managed to increase their market share in the first five months of 2013, the first time in 18 years. The US federal government has poured around $80 billion to financially rescue the auto industry, over $63 billion of which were used on GM and Chrysler. According to a March 31, 2013 Treasury estimate, the effort will cost taxpayers $20.3 billion. [source: Bloomberg]

Topics: gm, shares

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