Watchdog: Unlikely That Taxpayers Will Recover $81 Billion Given to GM & Chrysler
ABC's Matt Jaffe reports from Washington:
On the same day that Ford -- the one member of Detroit’s Big Three that did not receive a taxpayer bailout -- reported a quarterly profit of nearly $1 billion, a government watchdog warned that taxpayers are unlikely to recoup all of the $81 billion the Treasury Department has invested in General Motors and Chrysler.
In a new report released Monday afternoon, the Government Accountability Office stated, “Treasury is unlikely to recover the entirety of its investment in Chrysler or GM, given that the companies’ values would have to grow substantially above what they have been in the past.”
Since December 2008, Treasury has invested $81.1 billion in the two automakers, more than 12 percent of the total funds available from the $700 billion Troubled Asset Relief Program.
The government now has a 60 percent equity stake in the new GM and a 9.85 percent stake in the new Chrysler.
At the present time, the GAO noted, “The companies still struggle to remain competitive with other automakers and to regain market share.”
But the GAO also said that Treasury’s investments in the two automakers have “contributed to the stability of Chrysler and GM”.
Treasury officials told the watchdog that they will consider all options for selling the government’s ownership stakes in the two automakers, but officials did say that the most likely plan to dispose of the GM stake is through a series of public offerings, while the most likely option for the Chrysler stake is a private sale.
The timeframe for the government to give up its stake in the automakers remains unclear.
In the past, Treasury officials have said that a public offering for GM could occur sometime in 2010, but two independent experts told the GAO that GM might not be ready for a successful IPO by 2010 because the company may not have demonstrated sufficient progress to generate investor interest by then.
In a letter to the GAO in response to the report, Duane Morse of Treasury’s Office of Financial Stability said that Treasury “will continue to monitor and evaluate the performance of Chrysler and GM with an eye toward determining the appropriate method and timing for divesting Treasury’s interests in the auto companies.”