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The governments of Canada and Ontario own about 9 per cent of General Motors from a 2009 bailout. (Frank Gunn/Canadian Press)

The U.S. Treasury plans to sell its remaining stake in General Motors over the next 15 months, allowing the automaker to shed the stigma of being partly owned by the American government.

GM said Wednesday it will spend $5.5 billion to buy back 200 million shares of its stock from the Treasury by the end of this year.

And the U.S. government, unlike its Canadian counterpart, has promised to sell its remaining 300 million shares on the open market starting in January and get out of the company's business within the next 12 to 15 months.

The deal almost certainly means that Washington will lose billions on the $49.5-billion bailout that saved GM from being auctioned off in pieces during the financial crisis in 2008 and 2009. GM's buyback will cut the Treasury's stake to 19 per cent from 26.5 per cent.

For it to break even, the Treasury would have to sell the remaining 300 million shares for average of about $70.

Flaherty says now is not the right time to sell

Federal Finance Minister Jim Flaherty referred to that discrepancy almost three weeks ago when he said that now was not the right for the Canadian government to sell its stake in the company.

Ottawa and Ontario contributed $13.7 billion to help bail out North American automakers GM and Chrysler more than three years ago and combined own about nine per cent of GM's common shares.

Flaherty said that when he was in private business he didn't sell stocks at half their price. "I respectfully don't endorse the idea that we would divest at the current share price," he said at the time.

His remarks followed a report that the U.S.Ontario Finance Minister Dwight Duncan had been calling on Ottawa to unload the stock.

In reaction to that report, a spokeswoman for Duncan said Ontario would take action when "time and circumstances are appropriate... to ensure that Ontarians receive the best possible return on their investment."

GM shares rise on buyback plan

GM's buyback will see the company pay $27.50 each for the 200 million shares. GM stock closed Tuesday at $25.49, but shot up 7.1 per cent to $27.30 in early trading Wednesday.

For GM, getting the government out of its business removes a major business obstacle.

GM Chief Financial Officer Dan Ammann told reporters that GM has market research showing that government ownership has held down sales of the company's cars and trucks.

"This is fundamentally good for the business," he said at a hastily called news conference Wednesday morning.

The Treasury Department said in a statement that it would sell the remaining 19 per cent stake "in an orderly fashion" within the next 12 to 15 months, subject to market conditions.

U.S. Treasury still $21B short

Treasury said it will have recovered more than $28.7 billion of its investment through repayments of loans, sales of stock, dividends, interest and other income after GM buys back the 200 million shares. But that leaves Treasury about $21 billion short of recouping its investment.

In 2008 and 2009, the U.S. Treasury, aided by support from Ottawa and Ontario, bailed out GM to help stabilize and restructure the company at the trough of the financial crisis. The bailouts of GM and Chrysler were part of the US$700 billion Trouble Asset Relief Program created by Congress during the financial crisis in the fall of 2008.

"The auto industry rescue helped save more than a million jobs during a severe economic crisis," said Timothy Massad, Treasury's assistant secretary for financial stability.

But the government "should not be in the business of owning stakes in private companies for an indefinite period of time," he added.

Massad said that exiting the GM investment "is consistent with our dual goals of winding down TARP as soon as practicable and protecting taxpayer interests."

Although GM is paying a premium for the government shares, Ammann said it's still a good deal for GM shareholders. The number of shares on the market will reduced about 11 per cent, which should increase the value of the remaining shares.

The move was approved by the GM board Tuesday evening after the company got opinions from its management and financial advisers, GM said.

Government-ordered pay restrictions will remain in effect. But a ban on corporate jet ownership and requirements on manufacturing a certain percentage of GM cars and trucks in the U.S. will be lifted. GM says it already exceeds the manufacturing requirements and will continue to do so for the foreseeable future.

The company said it has no immediate plans to buy or lease corporate jets.

With files from The Canadian Press