U.S. Treasury Expects to Lose $23.77 Billion on GM, Chrysler Bailouts

The U.S. Treasury revealed in a new report to Congress that it will lose even more money than expected on the 2009 bailout loans given to domestic automakers. The Detroit News reports that the Treasury now expects to lose $23.77 billion on the $85 billion auto bailouts, up from the $23.6 billion losses forecast in fall 2011.

The bailout loans were given to Detroit automakers Chrysler Group and General Motors in 2009, helping the companies stay afloat and avoid bankruptcies while they restructured. Because GM’s stock price has slipped over the last six months, the Treasury would lose a significant amount of money if it were to sell of its shares in the company.

The Treasury reportedly holds 500 million shares in GM, a 26.5-percent stake. In order to break even on the auto loans, the government would need to sell each of those shares for about $53. Currently, The News reports that GM stock is trading for less than $25 — less than half what’s needed for the Treasury to recoup its bailout investment. When GM filed its initial public offering in 2010, each share traded for $33.

The Treasury also expects to lose about $1.3 billion on its bailout of Chrysler Group. Last summer, new owner Fiat paid $625 million to buy out the remaining Chrysler shares held by the U.S. and Canadian governments. However, another $1.3 billion is still owed by the since-dissolved “Old Chrysler” and has been written off as a loss by the Treasury.

Source: The Detroit News

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2012 Chrysler 200

2012 Chrysler 200

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