Taxpayer loss on auto bailout narrows
WASHINGTON (Reuters) - The government expects to recover more money than anticipated from the auto bailout as it pulls back financially from the sector, but taxpayers still face billions in potential losses, the White House said.
"We'll get back what we get back," Ron Bloom, the Obama administration's point man on manufacturing and restructuring of General Motors Co and Chrysler, said on Wednesday. "It will be what it is."
While the administration long ago conceded it would write off a portion of the $80 billion bailout, loss estimates have fallen from more than 60 percent to less than 20 percent, according to White House economic advisers.
Bloom said GM and Chrysler have made remarkable turnarounds and are positioned for success. But he said their futures are not assured and would not try to predict their fate. The surging U.S. auto industry hit a bump in May as the sluggish economy slowed sales.
Government intervention in the form of working capital for struggling GM and Chrysler was begun under the Bush administration and expanded by the Obama White House, which pushed the automakers into bankruptcy and financed their emergence.
Treasury has so far recouped about half of what was extended in grants and loans to GM and Chrysler, related retail financing arms, and suppliers in 2009. Some of the money was repaid in cash while the remaining interest was tied up in equity shares held by the government.
Chrysler has repaid $10.6 billion, but remains about $2 billion short of the total owed. Bloom said the Treasury would probably sell its 6 percent Chrysler stake to Fiat SpA, which runs the U.S. manufacturer.
Bloom declined to discuss timing or the value of that interest.
Sergio Marchionne, the chief executive of both Fiat and Chrysler, said on Tuesday talks with Treasury on a sale are progressing well.
Washington has recovered about half of the $50 billion extended to GM and has reduced its ownership stake from 60 percent to less than 30 percent.
Treasury plans to sell its remaining GM stake but Bloom said there is no target price or time frame for doing so. The government was eligible to act in May.
"We're going to look for opportunities to see when the market will be interested in purchasing additional shares," Bloom said. "The people at Treasury will analyze the markets and see what investor sentiment is and make the judgment."
GM stock closed 5 percent lower at $30.23 on Wednesday, far below an average share price of $54 necessary for the government to break even on the remainder of that investment, a government analysis concluded last month.
The administration is touting the auto bailout as a success because it preserved thousands of manufacturing and supplier jobs, maintained exports and a commercial tax base, and prevented expensive business wind-down programs.
Political overtones ahead of the 2012 election are unmistakable as Bloom's appearance in the White House briefing room set the stage for President Barack Obama to visit a Chrysler plant in the potential swing state of Ohio on Friday.
Democrats have begun criticizing Republicans who have questioned the bailout as a waste of money. House Speaker John Boehner, an auto industry bailout critic, is an Ohio Republican who met with Ford Motor Co CEO Alan Mulally on Tuesday.
Ford did not seek a bailout but Mulally stood by his company's decision to back the rescue of GM and Chrysler, saying their collapse could have wiped out the industry supply base and damaged the economy more broadly.
Peter Morici of the University of Maryland's Robert Smith School of Business said GM and Chrysler still have higher costs -- mainly for labor -- than rivals, which will blunt their progress.
He also said continued reliance on trucks, especially at GM, will hurt further as gas prices rise and consumers demand more efficiency.
"They like to advertise the Volt, but their business model is still based on the Escalade," Morici said of the bewly introduced electric sedan and the gas guzzlng Cadillac SUV.
(Reporting by John Crawley; Additional reporting by Deepa Seetharaman)