From the very beginning, the Obama administration made it clear that they’d never recoup all of the money they invested in the auto industry bailout. They just didn’t know how much they’d lose.
Now they’ve put a figure on it: The government will lose about $14 billion in taxpayer funds, out of the $80 billion it spent to bail out Chrysler and General Motors in 2009.
That’s a drop in the bucket compared to what the government has spent on bailing out the banks: About $4.6 trillion, with $2 trillion of that still outstanding, according to some estimates.
The administration has been taking several victory laps over the past week, since Chrysler announced it was paying back its $5.9 billion in loans early. GM previously announced that it had repaid a little more than half of the $50 billion it received in federal aid.
Tomorrow, President Obama will be at a Chrysler plant in Toledo, Ohio, to talk about the auto rescue and its aftermath. It is a theme that will likely continue as the run up to the 2012 presidential elections heats up.
Although a $14 billion loss doesn’t sound much like a victory, the administration has argued that the alternative would have been much worse: Millions of jobs lost and the collapse of American manufacturing.
Just because the companies have been saved doesn’t mean they will last forever, said Ron Bloom, assistant to the President for manufacturing policy. The government got them back on track, forcing them to cut costs, close plants, shut dealerships, restructure their debts and focus on more fuel efficient vehicles. Now it is their responsibility to keep going, he said.
“The fate of these companies rests with the men and women who work there, the managers, the boards of directors, and many things in the external environment,” he said. “We are pulling back from these companies, and so I won’t make any prediction about their ultimate fate.”
GM and Chrysler were on the verge of collapse in the final days of the Bush administration after Congress failed to approve an emergency loan package. The Bush administration gave the companies $17.4 billion in loans and required them to develop a restructuring plan by mid-February 2009.
Obama’s administration pumped billions more into the carmakers later that spring but won concessions from industry stakeholders, allowing it to push GM and Chrysler through bankruptcy court in the summer of 2009.
The government still has a stake in General Motors – it sold about half of what it owned when the company held its initial public stock offering in the fall – and has a small stake in Chrysler, as well as a stake in Ally Financial, the former lending arm of GM.
Bloom says the government is going to ease out of those stakes as soon as it can, but will do it slowly. The government won’t try to time the market, to get the greatest price for its shares as it can, because that could mean staying owners of private companies for much longer than Obama is comfortable with, Bloom said.
“He’s said many, many times, ‘I did not run for office to be CEO of an automobile company,'” Bloom said. If they try to sell only when the stock price is at its peak, “then all of a sudden you wake up two, three, four, five years from now and you still own a big stake in a private company.”