Bailout Watch 575: White House Predicts $30b Loss On Auto Bailout

Edward Niedermeyer
by Edward Niedermeyer

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.

Edward Niedermeyer
Edward Niedermeyer

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  • DetroitsaRiot DetroitsaRiot on Dec 13, 2009

    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.

  • Andy D Andy D on Dec 14, 2009

    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?

  • Blueice Patient 28, sorry, but it is Oktoberfest. Bring a kegof Kraut beer and we will 50% you.
  • Bd2 Probably Toyota, Hyundai is killing them these days.
  • Bd2 Japan is evil, stop buying their vehicles. I hope TTAC has a holiday for PEARL HARBOR.
  • Wolfwagen If Isuzu could update this truck and keep the cost between $25K - $30K they would sell like ice pops on dollar day in a heat wave.
  • 3SpeedAutomatic I'm at that the inflection point of do I continue to putting money in a 12 yr old SUV entering a heavy maintenance cycle or start shopping.I have noticed comparable new SUVs with $2.5k knocked off the sticker price, but still with the shenanigans of $300 for nitrogen in the tires. However, I have noticed the same 2 yr old SUV which are only $4.5K less than the original sticker price. Usually the used cars price should be 35% to 40% less. This tells me there's a stronger market for used as opposed to new. Part of this is to handle the monthly note. Considering installments of 72 months, you'll never pay the beast off. Just wait till the end of the model year which is just two months away, and I think the comparable new SUV will come with larger markdowns. May not be the color you want, but there are deals to be made. 🚗🚗🚗