DETROIT -

On the same day Ally Financial said it repaid debt to the FDIC, General Motors announced on Wednesday that the automaker will purchase 200 million shares of GM common stock held by the U.S. Department of the Treasury for $5.5 billion, or $27.50 per share.

The share buyback is part of the Treasury’s plan, also announced Wednesday, to fully exit its entire holdings of GM stock within 12 to 15 months, subject to market conditions.

The Treasury has announced its intention to sell its remaining shares of common stock into the market through various means and in an orderly fashion.  The department intends to begin its disposition of its remaining shares as soon as January, consistent with a pre-arranged written trading plan. 

In addition, the Treasury has agreed to relinquish certain governance rights that were included in the U.S. Treasury Secured Credit Agreement with GM.

“This announcement is an important step in bringing closure to the successful auto industry rescue, it further removes the perception of government ownership of GM among customers, and it demonstrates confidence in GM’s progress and our future,” said Dan Akerson, chairman and chief executive officer of GM.

Dan Ammann, senior vice president and chief financial officer added, “A fortress balance sheet has been a pillar of GM’s financial strategy and has enabled us to undertake today’s actions. GM’s balance sheet will remain very strong, with estimated liquidity of approximately $38 billion at the end of 2012, following the closing of the share buyback.”

The OEM indicated that the repurchase price of $27.50 per share represents a 7.9-percent premium over the closing price on Dec. 18. The share buyback is expected to close by the end of the year.

Officials explained this transaction will be accretive to earnings per share as GM’s total shares outstanding on a fully diluted basis will be reduced by approximately 11 percent.

In association with this share buyback, GM expects to take a charge of approximately $400 million in the fourth quarter, which will be treated as a special item.

After the repurchase, the Treasury will continue to own approximately 300 million shares of GM common stock, or approximately 19 percent of the outstanding shares on a fully diluted basis.  Government ownership of GM stock was the result of the auto industry rescue that began under President George W. Bush in 2008 and which was expanded by President Barack Obama in 2009.

Earlier this week, the Treasury announced that it expected to make significant additional progress winding down the Troubled Asset Relief Program bank programs in 2013. Last week, the Treasury sold its final shares of AIG common stock.

Overall, to date, through repayments and other income, the Treasury has recovered more than 90 percent ($381 billion) of the $418 billion in funds disbursed for TARP.

“The auto industry rescue helped save more than a million jobs during a severe economic crisis, but TARP was always meant to be a temporary, emergency program. The government should not be in the business of owning stakes in private companies for an indefinite period of time,” said assistant secretary for financial stability Timothy Massad.

“Moving to exit our investment in GM within the next 12 to 15 months is consistent with our dual goals of winding down TARP as soon as practicable and protecting taxpayer interests,” Massad continued.

In 2008 and 2009, the Treasury invested a total of $49.5 billion to help stabilize and restructure GM — as part of a broader rescue of the American automotive industry during a severe economic crisis.

Including GM’s purchase of common stock from the Treasury announced Wednesday, the Treasury has recovered more than $28.7 billion of its investment in GM to date through repayments, sales of stock, dividends, interest, and other income.

According to independent estimates, the rescue of the American auto industry helped save more than 1 million jobs. Moreover, since June 2009, the auto industry has added a quarter of a million new jobs.

Officials say the industry in general, and GM in particular, has rebounded since the rescue.  Since the rescue, GM has announced investments of more than $7.3 billion in the U.S. and created or retained more than 20,000 jobs.

“We come to work every day grateful that taxpayers from the US and Canada stepped forward to rescue our industry, and determined to show this extraordinary help was worth it,” Akerson said.

Ally Financial Repays Remaining $4.5 Billion of Debt Issued Under TLGP

In other developments, Ally Financial said it has repaid the remaining $4.5 billion in debt issued under the FDIC’s Temporary Liquidity Guarantee Program (TLGP), and in doing so, effectively exited the program. 

The company issued this debt on June 3, 2009 with a maturity date of Dec. 19.

“Repayment of the remaining debt issued under the TLGP marks an important milestone for Ally as we continue our plans to exit the government support programs utilized during the financial crisis," said Ally senior executive vice president of finance and corporate planning Jeffrey Brown.

“Ally has made significant progress this year in reducing risks, gaining momentum in our core automotive services and direct banking franchises, and successfully executing strategic actions that will further strengthen the company going forward,” Brown added.

Ally repaid $2.9 billion of debt guaranteed under the TLGP on Oct. 30. 

Analyst Reaction to Stock Buyback News

After both GM and Ally made their announcements Wednesday, Edmunds.com senior analyst Michelle Krebs offered her take on the fallout both for automaker and for vehicle buyers.

“There’s no doubt that General Motors is in a better position now than it was four or five years ago, and that's all thanks to the government bailout with taxpayer money. Still, even with GM buying back its shares, it will be years before we can fully assess the success of the auto bailout. The key is to watch and see if the company falls back into old bad habits,” Krebs said.

“For now, at least, GM is quite simply making better products to compete in high-volume segments, whether it’s the Chevy Cruze in the compact segment, the Cadillac ATS in the entry luxury segment, or the Chevy Equinox in the crossover SUV segment,” she continued.

“In the end, most car buyers care more about quality products and good value than they do about politics and corporate ownership, and they have better GM choices to consider because the automaker is back on its feet,” Krebs went on to say.

Next-Generation Chevy Camaro to Be Built in the U.S.

In yet more news coming out of the Motor City, GM also announced on Wednesday that the next-generation Chevrolet Camaro will be assembled at the Lansing Grand River (LGR) Assembly Plant in Lansing, Mich.

The company said this decision is based on a comprehensive business case.

GM explained lower capital investment and improved production efficiencies were key factors in the business case. The Camaro is the only rear-wheel drive (RWD) vehicle built at Oshawa, Ontario.

Assembling the next-generation Camaro at LGR consolidates the RWD assembly with the Cadillac CTS and ATS.

“As a result, GM will continue to deliver top-quality vehicles as efficiently as possible,” officials said.

The company emphasized that GM will continue to meet the production targets agreed to with the Canadian and Ontario governments during the 2009 restructuring.

Production of the current generation Chevrolet Camaro will continue on the flexible manufacturing line at Oshawa Assembly until the end of the current product lifecycle. The Buick Regal continues to be produced there, and GM recently invested $185 million to support the launch of two new products on the flex line as well: the all-new Cadillac XTS and the next-generation Chevrolet Impala scheduled to launch in 2013. 

In addition, GM recently announced it will add a third shift to support the launch of the new Impala there. The consolidated line at Oshawa Assembly will continue to produce the current generation Chevrolet Impala and Equinox until June 2014.