By on December 9, 2009

Can you see Whitacre here without a payback?

In a NY Times Op-Ed a few weeks back, I laid into the Obama administration for allowing GM to pretend that its $6.7b planned payback is even in the ballpark of what it owes the taxpayers. “If tens of billions in lost tax dollars is simply the inescapable price of preventing a systemic economic collapse, the White House should tell us so,” I wrote. Well, it appears that the White House agrees. Sort of. In an interview with the Detroit News, Gene Sperling, the senior counsel to Treasury Secretary Tim Geithner admitted

The real news is the projected loss [from the $82b+ auto sector bailout] came down to $30 billion from $44 billion

Well, halle-frickin-lujah. Now show us how we’re really going to get $50b out of GM and Chrysler.

Though Obama added a few rhetorical flourishes to highlight the “necessary sacrifices” angle to the auto bailout in a speech this week, the problem has never really been the governments. Don’t get it twisted, the White House’s admission was the right thing to do politically and morally, but the auto bailout is almost the least of its worries on the fiscal policy front. Indeed, the pure political implications of the bailout are likely to be minimal in comparison to the commercial implications. As I concluded in the NYT Op-Ed:

Afterward, while our government contemplates its runaway deficit and getting rid of its 8 percent of Chrysler’s equity, perhaps we’ll get an admission that General Motors still owes the American people. Without one, the relationship between the public and the automaker, and the Obama administration as well, may never be the same.

The relationship in real danger here isn’t the one between Obama and the American people. It’s the one between GM and Chrysler and the American people. Obama can always blame Bush or raise the “disorderly liquidation” counterfactual. For GM and Chrysler, outstanding debt is a lingering reminder of their unprecedented failure. In a brutally competitive industry, where firms will use a single MPG advantage to lay into rivals, a $30b outstanding welfare bill will follow the bailout babies like a dark cloud. Making good on every penny of their public support isn’t merely a question of political principle, it’s a matter of survival.

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25 Comments on “Bailout Watch 575: White House Predicts $30b Loss On Auto Bailout...”


  • avatar
    Robert Schwartz

    How do we know politicians are lying? Simple, their lips are moving.
    If they admit to a 30G$ loss, then it will be at least 60G$, and most likely 100G$.

  • avatar
    Cammy Corrigan

    $30bn loss? The could have paid every one of GM’s 300000 employees $1 million and shut the whole company down.  In short, that $30bn which the government lost could have been spent a hell of a lot better.  Schools which need resources, police stations who need support and roads which need repair. Still, at least you still have an car industry, hope it was worth the price.

  • avatar
    mtymsi

    What is being said here? Is it that neither GM or Chrysler will pay back the entire amount of their bailouts even if they have the ability to do so?

  • avatar
    highrpm

    Yes, most of the bailout fund debts were wiped clean in the bankruptcies. 

    So many billions of my tax money wasted, and these two companies are still losing money and market share. 

  • avatar
    highrpm

    Yes, most of the bailout fund debts were wiped clean in the bankruptcies. 

    So many billions of my tax money wasted, and these two companies are still losing money and market share. 

  • avatar
    midelectric

    Yeah, but this is capitalism and money to the little guy is welfare, the corporate dinosaurs get fed first and in a case like this where there’s a lot of debt, that means the bankers.  Plus, those 300000 employees would only be getting $100,000.

  • avatar
    FreedMike

    …and how much would unemployment, job retraining, foreclosure losses, lost tax revenues, and eventually welfare have cost if we’d let GM and Chrysler go down the tubes?

    Letting these companies fail would have been an absolute catastrophe. The true cost of this to the economy would have been FAR more than what we ponied up.

    • 0 avatar
      geeber

      The true cost of the bailout has not been tallied as of yet. I find it hard to believe that GM (and possibly Chrysler) will not be back, begging for “just one more” injection of money. See British Leyland, History of after 1968…

      Ultimately, the most productive path is to ensure that new companies can be created to generate tax revenues and provide employment. Generally, using taxpayer money to prop up dinosaurs discourages this from happening.

      And the days when GM and the American economy were synonomous are long over. It’s not 1953 – or even 1965 – anymore.

    • 0 avatar
      Cammy Corrigan

      The cost to the economy would have been painful in the short term, but more beneficial in the long term. The hole which Chrysler and GM would have left in the marketplace would have been filled up by bigger players (Ford, Hyundai, Toyota, etc) and they, in turn would have to employ more people in order to fufil that hole in the market. Like Peter Schiff said, had we allowed the banks to fail, it would have been painful, short term, but we would now be looking at coming out of the recession now, rather than looking at a second downturn.
       
      For the record, I don’t subscribe to free market economics, I’m a socialist, but what I do describe to is living by the sword and dying by it. GM and Chrysler enjoyed the benefits of a free market, until it affected them, then they “saw the light” and wanted a bailout, socialist style.

    • 0 avatar
      200k-min

      It’s a Red Herring to argue that GM & Chrysler needed a bailout to prevent catastrope. 
      These companies both owe the taxpayers big, and neither are ever going to pay up.  Both continue to bleed billions in $$$ and continue to drop market share.  That unemployment, job training, foreclosures, etc. that you’re afraid of will still happen…it’s just been pushed forward for now. 

  • avatar
    kaleun

    FreedMike: but we will have to pay that money for job losses anyway since those 2 companies will fail eventually.
    and because those GM/Chrysler subsidies keep them alive for longer, they will prevent or at least delay Toyota/Kia/Hyundai/BMW build new factories in the US. So we are losing money AND jobs right now.

  • avatar
    jkross22

    Essentially, the taxpayers (i.e., about half of Americans) are going to get bent over a bicycle rack twice:  once, so that Bush and Obama can claim ‘they did all they could’ to help and then again when these companies go under or are bought out and significantly downsized.  All those that claim this action averted catastrophe must have some special looking glass where they’re getting their info.
     
    The taxpayer losing $30B, err, $60B, is a catastrophe.

  • avatar
    ihatetrees

    What makes GM and Chrysler’s resurgence even more difficult is that buying one of their vehicles risks becomes a political statement – especially around election time. A Barney Frank or Bob Corker running smack about your brand is NOT good.  For every supporter who becomes a customer, you alienate 5 who won’t consider your product. A good business should be seen as being above it all.
    Full disclosure: I’m a Blue State resident, gun-nut Nissan driver who won’t look at (new) GM / Chrysler vehicles. There’s too much of a chance of a 2nd BK filing – and I doubt Uncle Sucker will pick up the warranty next time…

  • avatar
    mpresley

    I used to worry.  But now I see this (and all the other “depressing” economic stories) as good news.  In fact, I want to see more of it.  Because I’m convinced that it’s over, folks.  We just don’t know it, yet.  So, the sooner the US economy implodes, chaos reigns supreme, and ugliness really hits the streets, then perhaps the sooner we can work to build something truly worthwhile.  It will be unpleasant in the short term, but the cream eventually rises to the top, so I’m optimistic in that sense.  Blame?  Bush and his pals more or less started our downward spiral, but Obama, a man who actually makes Bush seem pretty competent, will likely finish it.  Cheers…

  • avatar
    derm81

    “So many billions of my tax money wasted, and these two companies are still losing money and market share”

    You paid billions of dollars in taxes???  WE, the American people paid billions in taxes, not YOU alone. People need to learn to differentiate between that.

  • avatar
    manny

    ‘For the record, I don’t subscribe to free market economics, I’m a socialist.’ This is the first thing that actually made me crack up today!  It just seems strange that a would-be socialist would hang out in such a capitalist-bourgeoisie site, after all cars and capitalism go hand in hand.

  • avatar
    Cammy Corrigan

    Manny, I’m also an atheist. Doesn’t mean I can’t hang out with theists. Also, I don’t see what’s so strange about talking about socialism on a “capitalist-bourgeoisie” site like this one. Doesn’t make sense to talk about socialism on a site which already believes in it. You want to talk to people who DON’T believe in it.
     
     

  • avatar
    manny

    Still, it was the first chuckle of my day.  Cheers.

  • avatar
    DetroitsaRiot

    The Big Three had nearly a 70 year 100% market share. They had nearly 40 years to react to competition when it materialized and could not respond (or refused to). Thats OK when it was their and their shareholders equity, at least you can dump a companies stock if you are displeased with its performance. The taxpayers are stuck with this white Elephant now. Most disturbing is that the Corporate culture at GM has not changed one iota.

  • avatar
    Christy Garwood

    Please review the facts on how many vehicles Cadillac-GMC-Buick-Chevy sells in the NA market. Despite the market share losses, people still buy more new GM vehicles than any other OEM.

    RE: Taxes for bailouts, banks and auto manufacturers, again refer to facts please. The US Gov’t printed money to create TARP funds. None of us here have paid those taxes.
    RE: Senator Corker – I read that he and his daughter are very complimentary of GM’s On-Star service in her 2005 Yukon after she was carjacked in Washington DC recently.  Again a fact easily verified.
    As an employee of Cadillac-GMC-Buick-Chevy, IMO I encourage you to speak all the opinion you want, but get your facts straight.

  • avatar
    DetroitsaRiot

    TARP funds weren’t created from pixie dust. We are all paying, and will continue to pay the price for a dollar that has less and less value. This is the kind of mentality that is in place at the Big Three unfortunately (especially GM apparently). At least Ford didn’t go on the dole as did GM and Chrysler.

  • avatar
    Andy D

    The sad part is that I coulda run GM or Chrysler down the tubes  for 1/2  the salary .  It  would have been a  decent  gig whilst  I was  getting  back  on  my feet from being  laid  off  by  the  phone company.  Wanna  buy  a bridge?


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