• Oct 6, 2010
The federal government spent roughly $86 billion in taxpayer money to bail out the auto industry. That's a lot of Monopoly money, folks, and when the industry we know and love was at its weakest point, early projections suggested that that the U.S. government and American taxpayers would never see $30 billion of that money. But as the economy slowly crawls back to life and cars and trucks are beginning to move with greater regularity, those forecasts are being adjusted downward.

A few months ago the Treasury Department proclaimed that the industry could, if everything fell just so, lose only $8 billion by the time the dust settles. We're now in October, and according to The Detroit News, the DoT is settling on a loss that looks a lot like $17 billion. That figure was revised downward from $24.3 billion due to increased optimism that the bailout of Ally Bank, the Cerberus-owned finance arm for both General Motors and Chrysler, wasn't going to be as big of a cash drain as was originally expected.

The revised auto industry loss comes out of a 200-page report that details the overall plight of the $700 billion ($475 billion has been spent to date) Troubled Asset Relief Program. The report states that the U.S. government stands to lose a grand total of $29 billion of the $475 billion spent. That $29 billion number is definitely tentative, though, because a lot of the numbers are heavily dependent on the price of stocks at the time the federal government decides to sell.

For example, at the current price of AIG shares, the government would actually book a profit of $21.9 billion. The bank bailouts are said to have produced another $16 billion in profits, while the mortgage securities buys are currently underwater to the tune of $46 billion. The $29 billion figure could go further up or down based upon the price of the initial public offerings at General Motors and Chrysler. The government put $43 billion into The General in exchange for 60.8 percent of the company's stock, and another $12 billion for a 10 percent stake in Chrysler. GM's IPO is expected to open next month, though the feds aren't expected to sell off all of its shares in the first offering. Industry watchers suggest that Chrysler's IPO could happen in 2011.

[Source: The Detroit News | Image: Mario Tama/Getty]


I'm reporting this comment as:

Reported comments and users are reviewed by Autoblog staff 24 hours a day, seven days a week to determine whether they violate Community Guideline. Accounts are penalized for Community Guidelines violations and serious or repeated violations can lead to account termination.


    • 1 Second Ago
  • 24 Comments
      • 4 Years Ago
      Actually, "we" won't see a penny, and "we" will continue to be thieved of more and more money forever until "we" die. That money was taken at gunpoint before any of "us" ever saw it, and funneled into a black morass known as government. Does it really matter where it gets distributed after that?

      Also, spider sense tingling. Censored comments? Oddly socialist in here...
      • 4 Years Ago
      I don't get it.

      If I take a house loan out I have up to 30 years to pay it off.

      Are you trying to tell me GM and Chrysler can't F'ing pay every penny back to us in something less then 30 years?

      That's a HUGE payout to the Unions if the USG does right this off.
      • 4 Years Ago
      so basically, at the end of a long winded article and an even longer winded 200-page report, nobody knows $hit other than that we bailed out the unions for somewhere between 8 and 60B.

      lovely, I know I feel better.



        • 4 Years Ago
        ...(Currently up-ranking all those who think that this was a good move and was well worh the cost, and down-ranking those who would rather have the employees of these companies end up in the soup line than allow any tax money go to help private corporations, regardless of the potential impact to the country as a whole)...
        • 4 Years Ago
        @DavidB

        Let me explain it so that maybe *you* could understand.

        The automakers owed the union pension funds billions of dollars in unpaid commitments. They had been underfunding the pensions for years and years and had come to an agreement with the UAW a few years ago to transfer the pension burden to the UAW along with 10s of billions of dollars to pay for it. When the automakers went bankrupt, the UAW was given some equity in the companies instead of the billions of dollars. This way, the US government didn't have to pay for their pensions through the Pension Benefit Guaranty Corporation, and the UAW would have a stake in maximizing the automakers performance. Once the automakers have an IPO, the UAW can sell off shares to fund the pensions.
        • 4 Years Ago
        What the hell? WE didn't bail out any unions. Technically, the unions sort of bailed out the automakers. WE bailed out the corporations and their financials units like GMAC.

        I ask you this: find one major fund transaction between the government and a union.
        • 4 Years Ago
        Sigh @ political argument.
      • 4 Years Ago
      @ High Climber:

      You said: "Rewind to Clinton and the other bleeding hearts deregulating the banking industry giving anybody with a pulse credit. Then look at the default rate 6-8 years later. Trillions of dollars in defaulted loans. McCain and other Republicans in 2006 tried to stop it but the Democratic controlled congress blocked them."

      You obviously aren't aware that former Senate Republican (and now bank lobbyist) Phil Gramm was the lead sponsor of the two bills which deregulated the banking industry: The Gramm-Leach-Bliley Act (all three sponsors were republican) also known as The Financial Services Modernization act of 1999 and the Commodity Futures Modernization Act of 2000.

      Phil Gramm (considered to be the father of the current fiscal crisis) was co-chair of John McCain's presidential campaign and was also his lead economic advisor. Gramm was the one who in 2008 said we are in a "mental recession" not a real one. Just imagine how much worse our current situation would be if McCain was elected president and this fool Gramm became Secretary of the treasury.

      Here's what Politifact.com has to say about what McCain and some republicans tried to do in 2006 that you referred to above:

      "All McCain was talking about then was the potential fallout of accounting troubles in Fannie Mae and Freddie Mac. He didn't say anything about a freewheeling climate among creditors that had major financial institutions becoming badly leveraged on bad loans."

      http://www.politifact.com/truth-o-meter/article/2008/sep/17/mccains-warning-fannie-and-freddie/

      It's interesting that wingnuts never mention why people are defaulting on these loans. According to Elliot Spitzer (democrat) in his February 2008 letter to the Washington Post:

      "Several years ago, state attorneys general and others involved in consumer protection began to notice a marked increase in a range of predatory lending practices by mortgage lenders. Some were misrepresenting the terms of loans, making loans without regard to consumers' ability to repay, making loans with deceptive "teaser" rates that later ballooned astronomically, packing loans with undisclosed charges and fees, or even paying illegal kickbacks. These and other practices, we noticed, were having a devastating effect on home buyers. In addition, the widespread nature of these practices, if left unchecked, threatened our financial markets."

      "Predatory lending was widely understood to present a looming national crisis. This threat was so clear that as New York attorney general, I joined with colleagues in the other 49 states in attempting to fill the void left by the federal government. Individually, and together, state attorneys general of both parties brought litigation or entered into settlements with many subprime lenders that were engaged in predatory lending practices. Several state legislatures, including New York's, enacted laws aimed at curbing such practices."

      This upset George W. Bush so much that in 2003 Bush used "an obscure federal agency called the Office of the Comptroller of the Currency (OCC)" to block the states from regulating subprime lending and later even sued Spitzer to get him to refrain from investigating unscrupulous banks. (So much for state's rights huh.) You can read more about it in these articles:

      http://www.washingtonpost.com/wp-dyn/content/article/2008/02/13/AR2008021302783.html

      http://nymag.com/news/intelligencer/51831/

      The truth is that both political parties are responsible for this current mess we are in. So High Climber, I suggest that you grow up and do some research before you go parroting the half-truths you hear on wing-nut media.


      • 4 Years Ago
      This administration will spin the loss as "only" $17 billion and a "win".

      What a joke...............
        • 4 Years Ago
        Actually, I think this administration will spin it as saving an entire American industry, and industry that props up countless other industries.

        Trust me, you do not want to see what happens when the auto industry completely collapses. It employs many, many more people than just the factory workers and car salesmen.
      • 4 Years Ago
      That's still a ton of money.

      I'm still so torn on all this. On the one hand, I'm glad our auto industry didn't collapse, and that jobs were saved.

      On the other hand, not sure how I feel about taxpayer money being used to prop up private corporations that just couldn't hack it in the market. It sent the message it's ok to fail, and people at the top weren't penalized but made out rather well on all this.

      It's sad we're at the point that losing $17 billion is better than losing $30 billion. Sigh. I hope the auto industry's new opportunity at life proves to be worth it.
        • 4 Years Ago
        It's all politics; if Republicans gain control, they could very well pass a law to force the government to sell all remaining shares for a loss, then rip TARP as a big loss for American taxpayers and blame Democrats. Don't believe me? Watch.
        • 4 Years Ago
        "That's still a ton of money.......not sure how I feel about taxpayer money being used to prop up private corporations that just couldn't hack it in the market."


        http://www.govexec.com/features/0807-15/0807-15s3s1.htm
        • 4 Years Ago
        @HC: You got "bleeding hearts" and "socialist" in there. Why not go for a talking-point triple and add "communist"? Add "atheist" and you've got your parrot grand-slam!
        • 4 Years Ago
        I feel your pain.

        On one hand, GM and Chrysler are basically *the* source of employment for middle/east America. On the other hand, these companies have had poor performance for a very long time, especially Chrysler.

        Overall, i think spending our tax $ to save a small remaining part of our American manufacturing base was worth it. And best of all, it was a loan and not a handout!!

        Meanwhile the banks continue to do the same crap that got them into this mess originally. And we lost tons of money on that! I think the bailout is far worse.
        • 4 Years Ago
        @Dave
        I don't know if government contracts are exactly the same thing. While one could argue that those corporations need government business to survive, I'd say there's a pretty large logical difference between the gov't paying a company to produce a product or service, versus stepping in and buying a corporation's stocks, keeping the company afloat, and managing their debts.

        @Luis
        Yea, that's probably something we'll have to study in hindsight, though for the time being I agree with you. It's all quite the mess.
        • 4 Years Ago
        It'll be worth it if the Alfa 2uetto concept is made a reality with no changes.
        • 4 Years Ago
        Uhh, High Climber do the bleeding hearts you refer to include the Republican Controlled congress? The deregulation bill you refer to was sponsored and passed by a majority of the republicans in the house and senate. It's funny how you just now admit that too much deregulation is a bad thing, that's what we have been saying for awhile.
      • 4 Years Ago
      The GOP/Reich wing would rather just sit by and do nothing. Oh wait...tax cuts for the rich, and let the economy, manufacturing, and those service jobs that depend on those manufacturing jobs, go to the toilet.

      And y'all want to put them back in power??? WTF?
      • 4 Years Ago
      In other words, the Bush bailouts cost much less than 700 billion...
      • 4 Years Ago
      Every time this discussion comes up on AB, I propose this scenario, and nobody seems to want to respond. I'll try again:

      If Chrysler and GM had failed, and entered recievership as Obama's critics would have wanted, their collected assets would have gone up on the auction block, sold to the highest bidder.

      Bear in mind that those assets would have included billions in production and R & D facilities, real estate, and, most importantly, a massive amount of intellectual property. Current management may have been questionable, but these companies were both still sitting on a treasure trove.

      So, given that these assets would have gone to the highest bidder, let me ask you, who would have had the most money to bid? And the most motivation to win? I'll tell you who: the Chinese.

      I believe that had GM and Chrysler failed, the Chinese would have had an opportunity to buy themselves a 30% share of the North American car market, pretty much overnight. Would that REALLY have been preferable to the $17 bln or so that went to save the industry?
      • 4 Years Ago
      $17 billion to save General Motors and Chrysler?

      Sounds like a good deal to me.

      Try to imagine this country without them.
    • Load More Comments