GM headquarters in downtown Detroit (Credit: GM).
DETROIT--General Motors, trying to clear the stigma of being partly owned by the U.S. government, will spend $5.5 billion to buy back 200 million shares of its stock from the U.S. Treasury as part of an overall plan that will get the government out of owning a large part of the automaker.

The Treasury announced today it will 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.

GM said Wednesday that it will pay $27.50 each for the 200 million shares, and it expects to close the deal by the end of the year. GM stock closed Tuesday at $25.49, and it shot up 7.1 percent in pre-market trading Wednesday to $27.30. Some analysts have out a target price of $40 per share on GM after the government exits its ownership.

"This is fundamentally good for the business," GM Chief Financial Officer Dan Ammann told reporters at a hastily called news conference Wednesday morning. He added that GM has market research showing that the government ownership has held down sales of the company's cars and trucks.

Credit rating agency Standard & Poors said the decision by the White House to divest its stake in GM is a positive for the automaker.

The government's stake in the GM dates back to 2009 when the White House signed on to a $49.5 billion bailout of GM to help the automaker through a bankruptcy amidst the broader financial crisis gripping the U.S. at that time. The controversial bailout, which became a hot point of debate between Democrats and Republicans all this way into last month's election, saved GM from collapsing into financial ruin and being broken apart.

The move leaves the government with 300 million shares, which it pledged to sell "in an orderly fashion" within the next 12-15 months, subject to market conditions.

GM's purchase of the 200 million shares still leaves the government about $21 billion short of breaking even on its investment. To break even, the government would have to get nearly $70 each for its shares.

GM has said for many months that continued ownership of the company was holding back many consumers from considering GM models. The company's executives have also claimed that the government-imposed limits on executive compensation was preventing it from hiring top talent.

Though controversial from the start, the bailout of GM, as well as Chrysler, has preserved a huge base of jobs in the rust belt, and as the two companies have recovered profitability they have hired thousands of new employees.

Associated Press contributing.

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