Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

How Is General Motors Company (GM) Like American International Group Inc (AIG)?

After becoming a financial mess and being taken over by the government, General Motors Company (NYSE:GM) underwent a bankruptcy process that wiped out shareholders and forced massive haircuts on bondholders. The restructuring has enabled GM to become profitable again, however, and the government has been steadily selling its stake. Last year, American International Group Inc (NYSE:AIG) was in a similar situation as Uncle Sam wound down its ownership of the insurance group. Can any comparison be made between General Motors Company (NYSE:GM) and AIG? Let’s take a look.

General Motors Company (NYSE:GM)

Healthier rivals
Both General Motors Company (NYSE:GM) and American International Group Inc (NYSE:AIG) were in a situation where they needed government support, but their respective industries also had members that did not require such assistance.

In insurance, Prudential and MetLife avoided AIG’s situation and even bought assets that American International Group Inc (NYSE:AIG) was selling. While General Motors Company (NYSE:GM) and Chrysler both needed government help, Ford Motor Company (NYSE:F) did not need help by anywhere near the same extent. Ford Motor Company (NYSE:F) did receive $5.9 billion in Department of Energy loans from the same program that helped Tesla Motors, and these funds did help the automaker through tough times. Government involvement in Ford Motor Company (NYSE:F) was less hands-on, though, and has allowed Ford to build the image of being the American automaker that didn’t take bailout funds.

Majority stake and share sale
As part of the bailouts, the government took majority stakes in both General Motors Company (NYSE:GM) and American International Group Inc (NYSE:AIG). This allowed the government to exercise control over the restructuring processes for the companies. The government did not want to be in the insurance or automotive businesses, however, and took the opportunity to reduce its ownership once each company was on stable ground again. In American International Group Inc (NYSE:AIG)’s case, the government was able to make over $20 billion in profit. Unfortunately, the final numbers from the General Motors Company (NYSE:GM) sale are expected to make the GM bailout a net loss for Uncle Sam.

Share price action
During the government’s sale of American International Group Inc (NYSE:AIG), publicly traded shares remained stuck in the high-$20 and low-$30 ranges. The fact that the price remained steady while millions of new shares were entering the market meant that there had to be significant buying pressure as well. The buying pressure was seen in fuller force after the government share sale was completed and shares moved into the mid-$40 range.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.