Report Expects Government to Recoup Chrysler, GM Investments

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GM and Chrysler will return to stability, allowing the federal government to sell off its equity to private investors, according to a new report from the Government Accountability Office.

The government holds a 60.1% stake in GM and a 9.9% stake in Chrysler, but with GM expected to be profitable by the end of the year and Chrysler looking to break even, the Obama administration is looking for an exit.

The biggest obstacle are the automakers’ pension plans, which rank among the largest private plans in the country with $104 billion in assets — much larger than the Pension Guaranty Benefit Corp., the federal body tasked with taking over failed pensions. The GAO says the pension plans needed a recovery both in the auto industry and the U.S. economy as a whole but that the automakers would need to contribute billions of dollars over the next few years to keep the plans viable.

The report also warns that if either company should stumble and fail to return to profitability in a “reasonable time frame,” the Treasury Department should look at every option, including forcing the companies into liquidation.

To avoid conflicts of interest, the GAO report also said that Treasury must set clear standards for measuring its investment. With $81 billion spent on rescuing the floundering companies, that investment remains substantial, but it now appears the government may recoup most of that money.

U.S. Expects Enough Profit From GM and Chrysler to Recoup Stakes (Detroit Free Press)

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