U.S. Taxpayers Can Kiss Some GM, Chrysler Loans Good-Bye
September 09, 2009
An independent panel overseeing the government's loans to General Motors and Chrysler has revealed that U.S. taxpayers probably won't be entirely paid back by the two just-out-of-bankruptcy automakers.
The Congressional Oversight Panel (COP), in its latest report issued Tuesday, said it is highly unlikely that the government will recover all of the $81 billion in loans to the auto industry. The panel did not say exactly how much in total it expected to recover.
The report did say Chrysler is "highly unlikely" to repay $5.4 billion of its $15 billion in government loans, and GM probably will pay back little of the initial $19.4 billion of its total $50 billion in government loans. In a statement, GM insisted it intended to pay back the loans.
"We are confident that we will repay our nation's support because we are a company with less debt, a stronger balance sheet, a winning product portfolio and the right size to match today's market realities," GM said in a statement.
In media interviews, Harvard Law Professor Elizabeth Warren, who chairs the oversight panel, said taxpayers have "a good chance" of recovering their investment -- but under the right conditions.
"It really depends on what happens to the auto industry going forward," she told Bloomberg Television. "If things go well, then the taxpayer could see its money back. But if it doesn't, then our losses could be substantial."
The report, however, noted "significant obstacles" for GM and Chrysler to overcome before achieving the level of profitability that would allow them to pay back all of the loans.
Citing analysts, the report said their performance and market value would have to exceed heights not seen for several years, and GM stock would need "highly optimistic" returns in order for the full investment to be repaid.
The panel oversees the government's $700 billion spending under the Troubled Asset Relief Program. The panel voted 2-1 to approve the report. Two panel members abstained from voting; another voted against accepting the report.
Dissenting member Rep. Jeb Hensarling, R-Texas wants a TARP special inspector general to investigate whether it was appropriate to use the $700 billion fund -- originally intended to save ailing financial institutions -- to bail out GM and Chrysler. He accuses the Obama administration of using the auto bailout, despite having its roots in the Bush administration, "to orchestrate the bankruptcies of Chrysler and GM so as to promote its economic, social and political agenda."
Treasury Secretary Timothy Geithner testifies before the panel on Thursday. The report now goes to Congress, where pressure for the government to quickly divest its equity investments in GM, Chrysler and GMAC is sure to build. -- Michelle Krebs
Posted by Michelle Krebs at 8:50 AM under Chrysler , Companies , Featured , GM , News | Comments (4) | digg this | Seed Newsvine
Something told me this would happen. The dude from texas blaming obama, GM guys telling us its ok, and the Ivy prof telling us we still have a chance sounds so scripted it makes me wanna puke. The Harvard person is obviously babying us. What does "right conditions" mean? People start feeling sorry and start buying their cars? And at this moment probably GM/Chrysler execs are planning exit strategies to take millions check written out by "taxpayers". Guess us "taxpayers" picked the really short hand of the stick. Wait, we didn't pick it, it was handed to us.
One thing I never understood about the "bailout". So "taxpayers" give GM/Chrysler money so that "taxpayers" can buy their cars? Hmm I do feel bad about all those people working at GM/Chrysler. I hope Henderson isn't gonna pull a Ken Lay.
Posted by: notabigdeal | September 09, 2009 at 1:21 PM
You don't need C.O.P to take notice of no payment. Even Miss CLEO can predict that!
Posted by: iskch | September 10, 2009 at 8:21 AM
If I was President I would have let them go bankrupt. Big Government has no place in a free market. Did they step in when other companies couldn't survive anymore? Bakers Square? Bennigans? Circuit City? Lehman? United Airlines? Delta?
Posted by: greenpony | September 10, 2009 at 11:25 AM
One of the lessons learned from the past 12 months is to not let any one company get so big that we, as a country, can't afford to have it fail. GM probably fit that bill, but not Chrysler. So I have opposed theChrysler bailout. Like most taxpayers, I'm totally irked by bailing out big companies to start with, but that goes back to my first point.
Yes, the taxpayers are supporting GM and Chrysler on several levels. What surprised me was that my cousin, a retired GM foreman, lost his pension and healthcare coverage due to the bankruptcy. That was a dirty trick, shame on GM. And again, I'm irked when I think about how much GM exec's get paid compared to the rank and file blue/white collars or exec's from competing (and more successful) companies. I wish the government would have put severe controls on their compensation as a condition of taking the bailout money.
Keep in mind that GM/Chrysler have been operating under tighter scrutiny and in comparison given less money than the financial firms. Lots of reasons for this, but the graft, loss, and waste there is much greater.
So I'll proudly keep driving my Corolla (made in California) and my Subaru (made in Indiana) and gladly not support crummy, bloated, out of step companies like GM or Chrysler. And as little as I think of GM/Chrysler corporate, the dealerships (at least around here, in Michigan of all places!) are far worse.
Posted by: mcmanus | September 13, 2009 at 5:02 AM