Federal Finance Minister Jim Flaherty says the government’s shares in General Motors are trading at too low a price to sell now and he plans on waiting until taxpayers can get a better deal.
Pointing to positive economic news coming from North America’s auto sector, Mr. Flaherty said now is not the time for a “fire sale” of the more than 140 million GM shares Ottawa and Ontario currently hold as a remnant of their contribution to an unprecedented bailout of the auto sector in 2009.
Mr. Flaherty distanced himself from the comments of Ontario Finance Minister Dwight Duncan, who told The Globe in an interview that “the sooner we’re out of the stock the better.”
“I just don’t think governments should be buying and holding stock in private companies,” Mr. Duncan said.
The shares – of which two-thirds belong to Ottawa and one-third to Ontario – are managed by a federal Crown corporation that reports to Mr. Flaherty. The Canada Development Investment Corporation reported this week that the combined value of the two governments’ shares in GM stood at $3.5-billion as of Sept. 30. However, it is estimated that the shares would have to be sold at about $53 each – more than twice their current value – for the two governments to get back the $10.8-billion they contributed toward the 2009 bailout of GM.
“When I was in the private sector for many years, I wasn’t in the habit of selling stocks at half their price,” Mr. Flaherty told reporters in Victoria, where he was asked to respond to a Globe story that quoted Mr. Duncan’s position on the shares. “The auto sector is back on track and growing again at something like 10 per cent. So I respectfully don’t endorse the idea that we would divest at the current share price.”
Mr. Flaherty said Ontario is free to make a request if it wants its portion of the shares sold independently.
“I don’t think at this time it would be in our interest [of] the taxpayers of Canada to engage in a fire sale of those shares and I don’t intend to do it right now,” he said.
For Ontario to sell its portion of the shares, it would likely have to ask Mr. Flaherty to direct the federal Crown corporation to sell one-third of the shares and send the proceeds to Queen’s Park.
Mr. Duncan’s office issued a statement Friday that played down his original comments and stressed that Ottawa and Ontario are on the same page when it comes to how to manage the shares on behalf of taxpayers.
“Ontario agrees with Minister Flaherty,” said Mr. Duncan’s spokesperson, Darcy McNeill. “Ontario, Canada and U.S. Treasury have worked very closely together over the last few years in supporting the auto sector and Ontario intends to keep doing so. That applies to divestment of the shares.”
No decision on the shares is considered imminent. The government of Ontario is currently in the midst of a prorogation and leadership transition following Liberal Premier Dalton McGuinty’s October announcement that he is retiring from politics.
The last time government-owned GM shares were sold was via a 2010 initial public offering that was conducted jointly by Ontario, Ottawa and Washington, which was also a major contributor to the North American auto bailout. The American shares are under the responsibility of Treasury Secretary Tim Geithner, who has indicated he would like to be replaced.
The Canadian Auto Workers weighed in Friday, urging Ontario and Ottawa to hold on to the shares and use them to leverage future commitments from GM.
“Contrary to conventional free-market rhetoric, it makes good business sense for governments to own direct equity stakes in crucial industrial firms,” said CAW president Ken Lewenza in a statement. “This is clearly not the time to sell the government’s shares.”
Editor's Note: Dwight Duncan, the Finance Minister of Ontario, should have been quoted on Dec. 1 as saying, "I just don't think governments should be buying and holding stock in private companies." He was incorrectly quoted as saying the opposite.