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Government loss on auto bailout drops by 16 percent to $20B

Rebound by GM and Chrysler allows government to recoup its investment faster, although losses still total more than $20 billion.

By Douglas Newcomb Feb 12, 2013 12:25PM

Photo by Flikr user MichiganMovesDespite initial skepticism and calls to let Detroit go bankrupt, the government bailout of GM and Chrysler has largely been deemed a success. This is due in large part to the two domestic automakers' own sales successes since the dark days of the recession.


But the federal government isn’t quite out of the car business just yet -- nor has it recouped all the taxpayer money pumped into GM and Chrysler to prop up the U.S. automakers. But government losses are shrinking.


According to The Detroit News, the Treasury Department said Monday that its estimate of losses on the $85 billion auto industry bailout in the fourth quarter of 2012 fell by 16 percent -- or $4 billion -- thanks to improvements in GM's stock price. In a report to Congress, the Obama administration said that projected auto losses dropped to $20.3 billion from a prior quarterly estimate of $24.3 billion.


The Treasury sold 200 million shares of its 500-million share stake in GM for $5.5 billion in December, which reduced its stake in the Detroit automaker to 19 percent. But The Detroit News reports that the sale was far below the break-even price, and that the Treasury now needs to average about $70 a share on its remaining stake to break even.


On Monday GM's stock closed at $28.53 a share, down 4 cents. At the time that the new statistics were compiled, GM’s stock price was $28.83, which means that, on paper, the government's projected losses have slightly grown.


The Treasury plans to gradually selling off its remaining stake on the open market and completely exit GM by March 2014. In 2009 the Treasury originally forecast it would lose $44 billion on its bailout of GM, Chrysler and their financing arms. That forecast dropped to $30 billion by the end of 2009, and to as low as $14.3 billion in 2011.


The Treasury has conceded that it may never recover the full $49.5 billion from GM. It has already lost $1.3 billion from the Chrysler bailout, despite the automaker's early full loan repayments.


[Source: The Detroit News]

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