By Kelsey Mays on July 24, 2013
How much are U.S. taxpayers still on the hook for GM's bailout? The Detroit News reports that if the Treasury sold its remaining stake — 189 million shares, or about 14% of the Detroit automaker — at Wednesday's $36.61 stock price, it would recoup just $6.9 billion, leaving taxpayers with an $11.2 billion loss of the $18.1 billion owed.
In fact, a government watchdog released a quarterly report to Congress Wednesday that said taxpayers would need GM stock to reach $95.51 a share, or around three times Wednesday's price, for the government to break even. This comes after a steady Treasury sell-down from the 61% acquired during The General's $49.5 billion bailout in 2008 and 2009. The government sold its stake down to 33% during the company's November 2010 IPO, and it plans to exit GM completely by April 2014.
"There's no question that Treasury, the taxpayers, are going to lose money on the GM investment," Special Inspector General Christy Romero, who wrote the 408-page report, told the Detroit News.Compare that to Chrysler's $12.5 billion bailout, of which taxpayers lost $2.9 billion when the government exited the automaker, the report says; that figure exceeds original estimates when the government exited Chrysler in July 2011. Both GM and Chrysler have repaid smaller loans to guarantee supplier contracts and auto warranties (about $1 billion in total) through parallel bailout provisions.
The real drain, if you're keeping track of recoverable bailout money, is neither GM nor Chrysler. The final major part of the government's bailout, which is to the financial arms of GM and Chrysler, has taxpayers owning 74% of the reorganized Ally Financial (formerly the GM-affiliated GMAC) plus $5.9 billion in preferred stock. Of the $17.2 billion loaned, Ally has paid back just $2.5 billion. That means the lender still owes the Treasury $14.6 billion, according to the report (totals are off due to rounding). Getting back much of it will be difficult, given Ally's distressed mortgage-lending arm filed for bankruptcy in 2012.
Chrysler Financial is really the only A-plus student here. It repaid its entire $1.5 billion loan; TD Bank acquired it in 2011 and eventually rebranded it TD Auto Finance.
Add it all up and the report says taxpayers are still out $34.8 billion in principle: $17.2 billion from GM, $14.6 billion from Ally and $2.9 billion from Chrysler. (Again, totals may not add up due to rounding.) Why does GM owe $17.2 billion and not $18.1 billion? That’s because the Treasury’s numbers come from early June, but it sold off shares this month and has yet to disclose updated figures. Romero’s office estimated $17.2 billion of remaining debt based on an analysis of what the Treasury currently holds, Romero’s communications director Troy Gravitt told us.
If the Treasury dumped all its shares in GM and wrote off the Ally debacle, taxpayers would still be down some $28 billion — a figure far below the Obama administration's original $44 billion estimate at the outset of the bailout, but still around $88.50 per American. That's out of $84.8 billion in Troubled Asset Relief Program funds loaned by the Bush and Obama administrations to GM, Chrysler and their financial arms, of which the Treasury ultimately dispensed $79.7 billion. Why the difference? Chrysler declined some of its loan and both automakers declined parts of their available funding to guarantee supplier contracts.
We should note, taxpayers are "on the hook" for companies all the time. When Volkswagen built its assembly plant in Chattanooga, Tenn., a report in the Chattanooga Times Free Press estimated state tax incentives to attract the company would add up to $400 million over the next 20 years, or $64 per Tennessean. Of course, Volkswagen added thousands of direct jobs to the tune of more than $1 billion invested. You could argue the same about GM, which filed its 14th straight quarterly profit today; it announced plans in March to hire more than 4,000 salaried IT employees in Arizona, Texas, Michigan and Georgia.
Editor's note: This post was updated on July 25 to clarify the difference between GM's $17.2 and $18.1 billion in outstanding debt. Gravitt returned our call after the time of publication to clarify the reason for the difference.
Senior Consumer Affairs Editor Kelsey Mays likes quality, reliability, safety and practicality. But he also likes a fair price. Email Kelsey