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The Bailout, One Year Later: Where Are They Now?

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GM and Chrysler logos

GM and Chrysler logos

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One year ago, America's auto industry was going through very tough times. Caught in the quagmire of recession, two of Detroit's Big Three had filed for bankruptcy, and they'd brought a few of their pals along for the ride. Americans were mixed about the federal government's bailout of the sector, with a handful of pundits claiming that taxpayers would lose every penny in the process. Today, however, the outlook for the industry and the American people seems slightly better than folks had feared.

Detroit Free Press ran some numbers on the bailout -- which companies received what, how much they've paid back, how much is owed, how much is likely to be recouped, and so on. And even the Cassandras in the room would have to admit that so far, the taxpayers are on-track to be repaid most of what they're owed -- the key word being "most".

At the A+ end of the scale, we find Chrysler financial, which paid back its $1.5 billion loan and about $21 million in interest. Suppliers also fared well: of the $5 billion allotted to help them, only $413 million was used, and that's all been repaid, along with $116 million in interest and profits.

In D+ territory, there's the big, bowtied albatross looped around the Treasury's neck: General Motors. To date, GM has repaid $7.7 billion of the $50.7 billion loan it received, with most of the remaining $43 billion converted into a majority stake in the company. Recouping that sort of cash sounds like a daunting prospect, but our hopes are buoyed a bit by the enthusiasm streaming from GM about its leaner, meaner lineup, its strong performance in foreign markets, and its impending IPO. Analysts vary in their current valuation of the company: estimates range from $51 billion to over $70 billion, which puts the fed in for a paper loss of about $14 billion or a profit of $2 billion, depending on how you look at it. Of course, until the IPO actually drops, GM's valuation remains somewhat hypothetical, so we'll wait and see how things work out.

And in the middle of the grading scale -- closer to the Gentleman's C -- sit Ally (formerly GMAC) and Chrysler. Ally has repaid about 10% of its $16 billion loan, and as the real estate market slowly steadies itself (thanks in no small part to historically low interest rates), chances are modestly good that it will be able to repay the outstanding $14 billion and change.

Chrysler, on the other hand, still owes roughly $10 billion on its $12.8 billion loan, and in some ways, repaying that will be harder for Auburn Hills than the $43 billion GM owes. Chrysler is a smaller company with a more limited lineup, and there have been few new offerings in that lineup for months: from the public's perspective, Chrysler has stalled. Still, CEO Sergio Marchionne maintains that taxpayers will be repaid in full, and he's been pretty level-headed so far, so we'll hold out hope for a bit longer.

Bottom line:  the government is still owed around $67 billion from three major corporations. Chances are good that it'll come close to recouping most of that, but the Treasury isn't likely to see profits like those generated by its loans to financial institutions. If you have time, skip over to the Free Press article and give it the once-over. It's not the rosiest of outlooks, but it puts us all in a much better place than many thought we'd be now.

[Freep]

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Comments (6)
  1. Good summary. Things should continue slow but gradually improving, as long as interest rates remain at rock-bottom levels. If rates shoot up any time before 2012 it could take much longer to get our money back.
     
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  2. You have terrible math skills. Since when is 10% better than 15%?
     
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  3. It should be noted that the auto companies are using some of these funds to open new manufacturing facilities....in Mexico.
     
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  4. TARP was not about generating profits but about keeping the house of cards relatively stable. It's a nice bonus if we break even or get some interest back.
     
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  5. @ Viral. All automakers use parts made in many companies. The American Car company hasn't changed. GM, Ford and Chrysler profits stay in the US. The import profits like Honda are sent back to their respective countries like Japan, Korea, etc. Why is that so hard to understand?
     
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  6. They paid back with TARP money!!??!!
    So really we gave them the money as a loan and then we paid it off with more of OUR money... An yet Ford borrowed, and made a profit...
     
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