GAO: Taxpayers Won't Recoup $80B Car Loans

Full Recovery of Investment in GM and Chrysler Unlikely, Government Watchdog Says

(AP)  Taxpayers are unlikely to recover their full investment in General Motors or Chrysler, government investigators said Monday in the latest review to cast doubts that the government will recoup the $80 billion it poured into the two automakers.

The Government Accountability Office concluded that General Motors Co. and Chrysler Group LLC likely won't be valuable enough for the Treasury Department to break even on its investment in the two auto companies that went though bankruptcy earlier this year.

The GAO also revealed that the Obama administration is closely scrutinizing the finances of GM and Chrysler and has set some requirements on production even though it has said it will maintain a hands-off approach on the automakers' daily operations.

To recover the loans Treasury gave Chrysler and GM to keep them afloat, the automakers would have to reach valuations they didn't approach even when they were healthier.

Treasury officials said they were considering a series of initial public offerings to dispose of the government's 61 percent stake in GM. For Chrysler, a private sale of the government's nearly 10 percent stake is more likely because of the government's minority ownership.

GM would need a market capitalization, or the market value of the company's outstanding shares, of $66.9 billion for Treasury to make its money back, according to GAO. GM's peak market value was $57 billion in 2000. Chrysler, which was last publicly valued at $37 billion in 1998 when it merged with Daimler AG, would need a market value of $54.8 billion.

Treasury officials told GAO that the companies' previous equity values were not comparable because GM and Chrysler have undergone substantial reorganizations through bankruptcies. The Obama administration has said it is confident it can recover the bulk of its investment in the GM and Chrysler restructurings.

GM spokesman Greg Martin said "if we get our job done, the government has an excellent chance of getting a return on its investment." Chrysler declined to comment.

In September, the Congressional Oversight Panel reviewing the $700 billion Troubled Asset Relief Program said most of the $23 billion initially provided to General Motors and Chrysler late last year was unlikely to be repaid. GAO did not provide an estimate of how much might be returned to taxpayers.

Treasury officials reiterated that they don't plan to be involved in the companies' day-to-day management. But as a major creditor and equity holder, Treasury is closely scrutinizing the financial well-being of Chrysler and GM.

In GM's case, it must supply 13-week forecasts every two weeks, monthly reports on its liquidity and monthly budgets covering a five-year period. All financial statements, budgets and other material must be turned over to Treasury as long as it owns 10 percent of GM. The automaker must provide its consolidated balance sheet until it repays its loans. Chrysler is required to make similar disclosures.

Both automakers must keep much of their manufacturing in the United States. Chrysler must produce either 40 percent of its U.S. sales volume domestically or come near its 2008 U.S. production volume. GM agreed to give its "best efforts" to keep its U.S. manufacturing within 90 percent of its business plan.

The companies are also subject to limits on executive pay and corporate expenses. Italy's Fiat Group SpA can increase its stake in Chrysler if it produces a new engine in the United States or a car that gets 40 miles per gallon.

Treasury officials told the GAO that the measures were meant to protect the government's financial interest, but acknowledged that they "reflect the administration's views on responsibly utilizing taxpayer resources for these companies," the GAO report said.

GAO also questioned staffing levels for the administration's auto task force. Treasury officials told GAO that they plan to disband the team over time as other Treasury aides monitor the companies' financial conditions. Once made up of 16 staffers, the task force now has just four professional staff members. Former task force head Steve Rattner has left, while Ron Bloom, a key member, is now also advising the administration on manufacturing policy.

GAO said it was concerned Treasury "may not have sufficient expertise to actively oversee and protect the government's ownership interests, including determining when and how to divest these interests."

[reality42]

America makes over priced junk and the goverment suckers us people into giving them more money for free--- Were American suckers

[hull7777]

All of our tax money gets flushed down the toilet whenever the Government gets involved in anything. I would think they could figure that out except then they would not have jobs and take the millions of $ on the side in the name of reelection.

If anyone thinks the bailout was a good decision and the taxpayers would get a return on their investment must be smokin something. The only time a bailout was effective was the first time with Chryler. But that was in the day when the CEO cared and there was still some ethics in business and maybe Washington (but I doubt that).

The US auto industry has been not competitive for years mainly because of the unions. However, when life seems good and you can't see the trees for the forest, management went along.

Now, the taxpayers again pick-up the pieces. Sooner or later everyone else runs out of money.

[Constitionalist]

Imagine that, the bailout program is really a welfare for the rich program. Never saw that coming.

[s0055d-2009]

You are going to end up with a lot of angry, un-bailed out people in America. They have to shift for themselves, while certain groups of people get helped with the tax money from those not getting anything. Another factor is the Federal Reserve scheme
to devalue the money in order to save the real estate thieves. Once the public wakes up and realizes what is going on, there will be problems.

[nowhiningallowed]

Another well thought out plan by the Obama Administration. Can't blame this one on Bush at all.

[Stop_the_crying]

Your correct, It's the first time. W was the villian. You must be one of those self employed individuals that file a schedule c and are responsible for the 68 billion under reporting of your taxes.

[wyodutch]

Incredibly... Americans continue to believe that there actually is a difference between the two liars clubs... the Republican Party and the Democratic Party.
.
White the thugs continue to beat you over the head... You argue about which thief is doing a better job.
.

[bubbadubba]

Well I guess if you ignore the jobs, taxes paid, local money made, companies who supply parts and employ people, dealership employees, possible US depression, panic in the US, and everything else that would have been destroyed if those companies went under you could say we will never get the 80 billion (nothing compared to the 800 billion we gave Wall Street Tycoons for their pockets) this story might make some sense.
Another stupid story from brainless people.

[Marc_1986]

@bubbadubba

Complete poppycock. Ford took no bailout money and look at them! You can claim that GM and Chrysler were in much worse shape, but why not let them fail... Odds are Ford would have increased its market share, and would have picked up some of the laid off workers lessening the impact. The Gov't is clearly the problem here in the auto industry: they twisted the arm of the UAW to make them give Chrysler and GM better deals, but when Ford comes asking for the same deal the UAW says no...

You're completely missing the point here. Bar a (some might say 'miracle') complete change in US car production and US/Asian relations, GM is going to have to cut jobs anyway, they simply cannot compete. So why are we throwing $80 billion at a problem just to 'kick the can down the road' 10 or 15 years? It was and is continuing to be a complete waste of taxpayer money.

[ch2444]

"""I bet the unions get some sweetheart treatment in the final healthcare bill too, so their "Cadillac" (I think I'd rather have a Bimmer policy) policies aren't taxed. Barry will find a way to steal someone else's tax money to cover the unions."""

The Unions are on the front lines of this communist take over of America. They wanted elite status back in the 60's, when they stole from manufacturers, by using the Government to stack the deck, therefor allowing them to be sued by every labor attorney in the phone books! Factory had a slow time of the year? "Too bad, my men sit your your lounge and play cards, read a book, whatever.. You still pay them"

Now that the manufacturers are all gone, and there's no money anywhere for them.. Guess what. They will take property, take your car, take your gold teeth.

Lets say you disagree, and stand up against these thugs, and fight back. A panel of 3 doctors under Obama's universal health care, will declare you insane, and demand you turn yourself in to a local hospital for the betterment of society. Of course, they'll be fair about it. Before coming to that conclusion, they will have tapped your phones, read your emails, bugged your house, and watched you come and go.

Hope and Change my friends.. Hope and Change.

[alphaa10000]

THE REAL BOGEYMEN

Those of the fringe right always have a tale to tell, but their story becomes wilder every day.

They mindlessly repeat the paranoid propaganda of the GOP and its wealthy corporate patrons-- even opposing recovery efforts which aid Detroit-region businesses, workers and families.

They deceitfully blame unions, but not the poor management which brought disaster in Detroit and on Wall Street.

Americans have only one question for bozos of the GOP-- how can anyone become so thoroughly duped as to carry water for the party which delivered Wall Street 2008 and a grinding recession?

Federal aid to Detroit retained our industrial base and saved hundreds of thousands of jobs that otherwise would have been lost. More importantly, Detroit survives as still another base for rebuilding the economy.

But no rebuilding occurs without dust and debris. What Americans want most now is to work hard for genuine economic reform and recovery-- a recovery which benefits all of us, not merely the Wall Street and corporate elite given tax breaks under Bush. Or the banks still foreclosing on American families.

The GOP over eight years brought poverty and ruin to the American middle class. Now, bankrupt of ideas-- but just in time for Halloween-- their only platform is wild, deluded talk about "communist takeover" and "socialism".

More than ever, the GOP is desperate to deny what Bush proved beyond all shadow of doubt-- they are the real bogeymen.

[sl3_007]

Should have let both go through bankrupcy. Ford obviously was better run and survived. We have way too much auto production and we didn't need to spend taxpayer money on this. I am sorry that the workers would have been hurt, but being self employed I received no bailout on my IRA which lost half its value. You Obama people need to get a grip on the magnitude of our current gov't spending. Bush did us no favors, but the Dems controlled the congress the last 2 years and just love to come up with a gov't spending solutions to everything. Gov't is out of control right now. It is scary with 3 of the most incompetent politicians, Obama, Pelosi and Reid, leading this country to financial ruin.

[spaceatoms]

Maybe we should just get rid of cars altogether, then we wouldn't have pollution and wouldn't have to bailout the compensation packages.

[John_272]

When will government ever get better? Source: http://www.hudincomeexclusions.wordpress.com.

[vancouverboo]

No! Really?

[newyorkmom]

the liberals great fleecing of america continues; spend, spend, spend..the deficit goes up and the economy goes nowhere...this is change we can believe in?

[Stop_the_crying]

Yep. The conservative do the same with cutting taxes. But do nothing. We have the liberals that tax and spend. The conservatives just cut taxes. At least the liberals break even. The conservatives just dig us deeper. Hey what about W not even saying th R Word (recession). Cut taxes for his business buddys and scvrew the average taxpayer.

[wilbursandersjr]

What is so sad is that you believe the crap you wrote jbd37. Trickle-down did trickle down. How much crack did you smoke in the 80's to miss that fact. Bush was no Reagan. He was not a Trickle-down guy except in title only. Get your facts straight and post later.

[scallywag12]

This is news? I could of told you that an I'm just average idiot! We all new we wouldn't get the money back. It all goes to bonuses for the already greedy rich b@st@rds and they're laying back in the high rise offices counting it with a smile on there face. They think they earn it. Bend over America here's your reward!!!!

[Lawyers-Guns-n-Money-01]

Simple solution. Go to your nearest new car dealer and pick yourself out a new car. First come, first serve. Once we taxpayers have reached the $80B quota based on MSRP, sale's over folks.

(Only catch is, you have to get yourself a GM or a Chrysler.)

[Stop_the_crying]

Afraid to buy american!!!!!!!!!!!!!!

[jbd37]

As long as there is a democrat in the presidency cleaning up the ramifications of a republican trickle-down under-regulated private economy and a spend-more-than-tax government budget EVEN in the years of relative economic health.... there will be hypocrite naysayer ideologue pessimist sore losers. Likely, you missed the boat on good governing policy years ago. I encourage you to look in your crystal ball and tell us where we ("mainstreet America") would be without the bailouts/investments only the government was capable of.... Less manufacturing, less credit, less private investment, less employment more despair. But as it is you seize on a dire long range prediction in the face of many short range analyses coming out that recovery is around and upon us. How about supporting those getting down in the trenches pulling us out of this mess, use this prediction as a call to arms --eg GM: "if we get our job done, the government has an excellent chance of getting a return on its investment." Don't just sit back in your armchair on the computer and rail. This is your country: are you part of the solution or part of the problem?

[choptopford]

TIME TO FORECLOSE ON THEM

[rightbehind]

I don't mind. They had to give up some of the exclusive American market share to foreign automakers. Many of those automakers the states paid heavily to get. Nobody ever offer tax insentives to the big 3.

[all_father]

But... but... but the government assured us we'd get our money back. LOL

On a serious note, the government can't even handle its own business affairs... why on earth would anybody believe their meddling in the free market sector could help these companies or the economy? GM and Chrysler are now nothing more than socialist holdings that will struggle to show any consistent profit for years to come (at least as long as the government is involved).

[rightbehind]

They are already showing profits and we have cars now capable of 200 miles to the gallon. This country is heading in the right direction. As for the economics of dung free market the results are in and it required a socialised bailout to save it. Be a long time before the country goes back down that road. People have had enough of hedge funds and credit default swaps.

[Marc_1986]

@rightbehind

Wrong. Please give me an example of when socialism has ever worked and benefited the economy? You won't find one because socialism has proven to be an inadequate way to run an economy.

Great, we have a car that can go 200 miles to the gallon. Toyota/Honda have the same technology, if not better. They also produce cars cheaper and more reliably. GM could have the greatest idea ever, but if Toyota can do it cheaper, then it really doesn't matter.

I think it'll be sooner than you think before we're going back down 'that road'.