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Obama: GM's stock sale shows 'tough decisions' paid off

By the CNN Wire Staff
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GM rebounds, taxpayers benefit
  • President Obama says GM's initial public offering shows wisdom of government bailout
  • The automaker raised $20.1 billion on Thursday, and the government got $11.8 billion
  • Obama credited "tough decisions" by GM's leadership for keying its turnaround

Washington (CNN) -- President Barack Obama trumpeted Thursday's highly anticipated sale of General Motors stock, saying its success proved the wisdom of the automaker's federal bailout last year that he claimed saved over a million jobs.

"Today, one of the toughest tales of the recession took another big step toward becoming a success story," Obama told reporters Thursday afternoon.

The Detroit, Michigan-based automaker filed for bankruptcy 17 months ago, then -- after receiving money and guidelines from the federal government -- undertook a series of measures to get its finances in order. Last week, GM posted its best financial quarter in 11 years.

On Thursday, the company raised $20.1 billion with its initial public offering, with shares opening at $35 apiece -- $2 above the offering price. The offering, which raised more than any other in U.S. history, led to a strong day overall on Wall Street, with the Dow Jones industrial average jumping 1.6 percent or 173 points.

Obama credited "tough decisions" by GM's leadership with keying the company's comeback. He said GM -- with fellow Michigan-based auto giants Ford and Chrysler -- have created more than 75,000 jobs in recent months.

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"Just two years ago, this seemed impossible," said Obama. "We are finally being able to see some of these tough decisions that we made, in the midst of crisis, pay off."

Obama said that "American taxpayers are now positioned to recover more than my administration invested in GM."

The U.S. Treasury Department, which took a 60.8 percent stake in GM in return for the $50 billion bailout that saw it through bankruptcy, sold 75 percent of the common shares put up for sale Thursday. That means the federal government -- and, in effect, taxpayers -- got back at least $11.8 billion.

But even with that stock sale and other money returned to the government by GM, about $27 billion will remain unpaid. Whether taxpayers get that back depends upon the price the government gets for its remaining 33 percent stake in the company, when it sells shares in the future. The share price would have to rise about 65 percent in order for taxpayers to break even.

The Obama administration said that government action may have saved 1.4 million jobs, be they on the assembly lines or in showrooms. The president claimed that these moves also saved federal and state governments' billions of dollars that they would have been spent to help the unemployed.

As to what happened Thursday on Wall Street, financial expert Joseph Saluzzi said that GM and the government had every right to be pleased.

"The GM deal looks like it went well, which shows there's finally some stability and a growing company," said Saluzzi, co-head of equity trading at Themis Trading.

Many voters cited the lackluster economy, jobs picture and allocation of billions in taxpayer funds to private corporations -- and the Obama administration's handling of it -- as forefront in their minds when Republicans scored big gain in this month's mid-term elections.

Obama steered hundreds of billions of dollars into various U.S. companies, from banks to insurance companies, trying to prevent an economic collapse, continuing efforts by his predecessor President George W. Bush. Republicans have lashed out at bailouts of companies like GM, saying they unnecessarily bloated the federal deficit and wrongly injected the federal government into what should be private enterprise.

Yet the actions have had their defenders, as well. In an op-ed published in Wednesday's New York Times, investment giant Warren Buffet praised "Uncle Sam" for its efforts to fend off a economic depression, saying Washington responded well to a "destructive force unlike any seen for generations."

CNNMoney's Blake Ellis and Chris Isidore and CNN's Ed Henry contributed to this report.