Report: Auto Bailout Losses Reduced to $21.7 Billion in Latest Treasury Estimate


The U.S. government now stands to lose an estimated $21.7 billion for the auto bailout, a figure  $2 billion less than the forecast from January 2012.

The improved outlook is due to an uptick in General Motors stock value, which closed at $24.03 on Wednesday, according to The Detroit News. GM’s stock is up about 19 percent this year, but that’s still not enough to compensate for the slip experienced since November 2010 when the value was $33 at its initial public offering.

The Treasury loaned $85 billion to the Chrysler Group and GM in 2009 as part of a bailout to save the Detroit automakers from bankruptcy. Last summer, Chrysler’s parent company Fiat bought out the remaining shares the U.S. and Canadian governments had in the company, but the Treasury still recorded a $1.3-billion loss owed by the “Old Chrysler.”

The Treasury has a 26.5-percent stake in GM, equal to about 500 million shares. GM’s stock price would need to jump to $53 per share for the government to recover its losses. The government has put off its sale of GM stock indefinitely. Thanks to its stake in GM, the government can enact limits within the company including compensation for executives. Earlier this week, it was reported that the government plans to freeze or limit the compensation of GM executives like CEO Dan Akerson. His 2012 salary shouldn’t change from 2011, which means he will earn a $1.7 million salary, $2 million in long-term stock, and $5.3 million in salary stock.

Source: The Detroit News

From the Fox News press one would think that this "bailout" was just free money thrown at these companies. They actually bought equity, or gave high interest loans. A net "loss" of $1.3B at Chrysler is unlikely, they were charging FIAT 19% interest, which is why they paid this off ASAP. This company makes $50B in revenue for the US economy with 51,000 employees. If they let it fail, the net losses for the US economy would have been 10-20X that $1.3B number. The math at GM is even bigger, but unlike the Republican plan, the top GM brass was replaced, and the ridiculous executive salaries reeled in. The US auto industry is the only business where you can fail and put your company in chapter 11, and make tens of millions in compensation. The Wall street bailouts were real bailouts, netting Americans near zero, and a making a few people very, very rich. With some better products and a better economy, GM shares could hit $53, but not if they continue to rely on the Silverado for profits when the price of gas is skyrocketing.

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