U.S. plans to exit GM stake by year-end, may lose $10 billion

WASHINGTON (Reuters) - The U.S. Treasury Department said it expected to sell its remaining shares of General Motors Co by the end of the year, a plan that may leave taxpayers with a shortfall of about $10 billion on the automaker's 2009 bailout.

Treasury on Thursday said it had completed the sale of 70.2 million shares of GM stock and to date had recouped $38.4 billion from the $49.5 billion taxpayer-funded rescue of the Detroit company.

At current prices, Treasury would recoup another $1.2 billion from its remaining stake, bringing its total recovery to $39.6 billion.

"Our goal was never to make a profit," said a Treasury official who requested anonymity. "It was to save the U.S. auto industry."

Treasury said the sale would take place by year-end, subject to market conditions and if average daily trading volumes continue at recent levels.

GM stock was up 3.2 percent at $38.90 in morning trading.

Analysts have said Treasury's exit from GM would lift the "Government Motors" stigma from the automaker, which would also be able to begin paying dividends for the first time since the restructured company returned to the market with an initial public offering three years ago.

Treasury's sale of the shares "could lead to the lifting of compensation limitations for GM's key executives," Buckingham Research analyst Joseph Amaturo said in a Thursday note to clients.

The removal of those restrictions also may enable GM to offer a more generous and competitive compensation package if the board elects to search for outside candidates to succeed Chief Executive Officer Dan Akerson, said analyst Matthew Stover of Guggenheim Securities.

In a quarterly filing to Congress in late October, the U.S. government said it already had booked a loss of $9.7 billion on the shares, which were acquired as part of GM's Chapter 11 bankruptcy filing and subsequent bailout.

Treasury since then has whittled down its GM stake through a series of stock sales. It previously said it expected to exit by April 2014.

"While the U.S. Treasury's equity stake draws to a close, our work to transform GM continues," GM said. "We're making great progress in our efforts to make the most of this second chance."

(Reporting by Timothy Ahmann in Washington and Paul Lienert in Detroit; Editing by Lisa Von Ahn)