Govt to Lose $14B of Auto Bailout Funds
WASHINGTON (AP) — The Obama administration said Wednesday that the government will lose about $14 billion in taxpayer funds from the bailout of the U.S. auto industry, a third of the loss officials had initially estimated.
In a report from the president's National Economic Council, officials said that figure is down from the 60 percent the Treasury Department originally estimated the government would lose following its $80 billion bailout of Chrysler and General Motors in 2009.
The report's release coincides with the administration's efforts to tout the bailout's role in the revitalization of the U.S. auto industry after last week's announcement that Chrysler is repaying $5.9 billion in U.S. loans and a $1.7 billion loan from the Canadian government. Those payments cover most of the federal bailout money that saved the company after it nearly ran out of cash in and went through a government-led bankruptcy.
For Obama, the auto industry comeback is one of the few bright spots in an otherwise sluggish economic recovery. What's more, the auto industry has a big footprint in key presidential battleground states like Michigan, Ohio, Indiana and Missouri.
General Motors Co., which also went through bankruptcy, received a $49.5 billion U.S. bailout. The federal government has lowered its equity stake in the company from 61 percent to 26.5 percent of GM after selling part of the stake in November. Ford did not seek federal government assistance.
"In the last year, the Detroit Three have all gained market share, they have all added jobs and they have all shown the ability to make money," Ron Bloom, President Barack Obama's top adviser on manufacturing, said in reference to the three U.S. car makers.
Bloom declined to say when the government would sell its remaining stake in G.M. the company's stock price fluctuated between $29 and $39 over the last two months. It was selling at $30.81 per share on Wednesday.
The administration's decision to promote the industry and the role of the bailouts came on the same day the industry reported a falloff in May sales after an aggressive performance earlier this year. General Motors' sales fell 1.2 percent as it offered fewer deals to customers and cut sales to rental car companies. Ford sales fell 2.4 percent as strong sales of small cars were weighed down by lower sales of pickup trucks.
Still, Treasury Secretary Timothy Geithner said U.S. auto companies are now at the forefront of a comeback in American manufacturing.
"We cannot guarantee their success, and at some point they may stumble. But we've given them a better shot," Geithner wrote in an opinion piece in Wednesday's edition of The Washington Post.
"While we will not get back all of our investments in the industry, we will recover much more than most predicted, and far sooner," he wrote.
Obama will visit a Chrysler plant in Ohio Friday to tout highlight the company's success.
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.