If you're keeping a list of who's been naughty or nice, you might want to sharpen your pencil for Chrysler and GM.
In a special message of holiday cheer, Chrysler announced through filings last week that its pre-bankruptcy self doesn't appear to want to make good on its $3.7 billion loan from U.S. taxpayers. The money went to the old Chrysler (now called, officially, the "OldCar Co") through the Troubled Asset Relief Program (TARP) in April of 2009 when the company announced its "fast track" Chapter 11 bankruptcy.
Counter that against the letter then-CEO Bob Nardelli wrote to stakeholders before the money came through:
"Our viability plan demonstrates that Chrysler will repay the U.S. government loans in full, with a premium beginning in 2012," Nardelli wrote. "As we have indicated all along, shared sacrifice is necessary for Chrysler's survival."
Nardelli, long gone, doesn't have to answer why, but we hope he blushes when he looks at himself in the mirror in the morning. The announcement also appears to fly in the face of TARP's marching orders, which counted recoupment as a major factor in its passage through Congress. The thinking was that no TARP funds would ever add to the national debt. At least from what we've heard from Chrysler, that doesn't appear to be the case.
When we reached out to Chrysler for comment, spokesperson Shawn Morgan told us: "First, the "Chrysler" you are talking about is now called "OldCar Co" and that company is still in bankruptcy. That company, "OldCar Co" made a filing last week however, you'd need to speak with that company for a comment." The nuances of the "old Chrysler" and "new Chrysler" as created by the bankruptcy filing are likely to be lost on most in the American public.
To paraphrase Gertrude Stein, $4 billion is $4 billion is $4 billion. Especially when it's public money.
As commenter "hillsamurai" duly noted in our comments section, "If 'OldCar Co' is not going to repay my money that it was given, will "OldCar CO" give me a new car as reimbursement?"
Journalist Chris Woodyard, author of USA Today's DriveOn blog, describes the awful conditions in which Chrysler is operating as a reason for its inability to pay back the loans made to the "OldCar Co."
"Chrysler is on track to post the worst sales performance of the 10 largest automakers this year," Woodyard writes on his site. "Sales tumbled 38% during the first 11 months of the year. In November, sales were still down 25% even as Ford and General Motors had largely swung back to even compared to the same month a year ago, Autodata figures show.
"Not bleak enough? Consider this: Underscoring its lack of product, Chrysler, Dodge and Jeep have no press conferences scheduled for the all-important Detroit auto show where new models are typically unveiled amid lots of hoopla. There used to be one press conference for each brand before its bankruptcy reorganization earlier this year. Dealers are stuck selling the same tired models that have gone without updates for years now. Even Fiat CEO Sergio Marchionne, with a controlling stake in Chrysler, sounds pessimistic about a turnaround."
This flies in the face of Chrysler's last major government bailout, of course. Back in 1979 the company took $1.5 billion in government-backed loans (while only $1 per year went to pay CEO Lee Iacocca's salary at the time) but was able to repay it ahead of schedule, something that the Heritage Foundation notes as a "favorite example cited by proponents of national industrial policy who call for massive and costly federal efforts to revive what they describe as a deperately ailing American economy." The foundation was not an advocate of the 1979 bailout (or that of last year, either), citing amongst other things that the current and future laid off Ford and GM workers never understood that their tax dollars were being used to destroy their own jobs in order to save jobs at Chrysler.
GM, on the other hand, is making news from the announcement that it will not only pay back its $52 billion loan, but do so early. Of that $52 billion, a good portion of it went into equity in the company ($45.3 billion in shares, which is why we now say that U.S. taxpayers own about 60 percent of GM) while the rest was a straight cash loan to be repaid over a period of time. The company said it will present the government with a payment of over $1 billion by the end of this month, while the remaining $5 billion or so will be paid back by mid next year. This is different from Chrysler's news, however, because it constitutes the "new GM," whereas GM's version of "OldCar Co" is separate. Confused yet?
In any case, GM is presenting a seriously fast repayment schedule, especially considering that GM will likely begin offering stock again in 2010, at which point the U.S. can sell its shares in GM on the public market and recoup the remaining $45 billion.
Where do you weigh in on the bailouts, especially in the light of Chrysler and GM giving notice of their payback (or lack of payback) schedules?