U.S. Treasury Loses $11.2 Billion In Accounting Of GM Bailout

Cameron Aubernon
by Cameron Aubernon
u s treasury loses 11 2 billion in accounting of gm bailout

Detroit Free Press reports the U.S. Treasury lost $11.2 billion in taxpayer money from the rescue of General Motors back in 2008, up from the $10.3 billion estimated after the agency sold its remaining shares back in early December 2013. Part of the final figure came as a write-off of an $826 million “administrative claim,” which was found in a report by the Office of the Special Inspector General for the Troubled Asset Relief Program. The overall figure pales in comparison to the $50.2 billion given by both Bush and Obama administrations between 2008 and 2009 to GM as the automaker struggled through its financial crisis at the onset of the Great Recession.

In other financial news, Automotive News reports the automaker’s new financial arm, GM Financial, has launched a pilot program for prime-risk consumers in preparation for an expansion into the market later this summer. In addition, the auto lender proclaimed last week that it began GM-backed lending in the near-prime market during Q1 2014 alongside its subvented subprime loans. Finally, GM Financial reported a net income of $145 million during the same period — acquiring the majority of former GM lender Ally Financial’s International Operations, as well — with loan and lease originations totally $2.1 billion in the United States and Canada, $4.2 globally.

Another former GM subsidiary is looking into “improper payments” made by employees in China. As Reuters reports, Delphi found a number of these payments by manufacturing facility employees, which could be in violation of the U.S. Foreign Corrupt Practices Act. The supplier is working closely with both the Securities and Exchange Commission and the U.S. Department of Justice, as well as contacted outside counsel to assist. Delphi warned that if what they found was true, the violations “could result in criminal and/or civil liabilities and other forms of penalties or sanctions.”

The Detroit News says GM has begun construction on a new motorsport engine design and production facility set to open in 2016 within its Global Powerplant headquarters in Pontiac, Mich. One hundred engineers and technicians are expected to transfer from their posts in Wixom, Mich. to 138,000-square-foot Performance and Racing Center in Pontiac by the middle of 2015, where they will work alongside the production engine team in sharing technology gathered from the track. The center, part of a $200 million investment into GM’s Pontiac facility, will offer an electric motor lab and a gear center to aid in the development of advanced electric motors and transmissions.

Finally, Forbes posits that GM’s lack of thorough engagement with its customers could once again give some loyalists pause before giving their favorite brand the benefit of a doubt. In one example, the automaker — which already had fewer engaged consumers pre-recall than the likes of Ford, Hyundai and Toyota with their respective recalls — posted the largest post-recall decline while Toyota and Hyundai lost the least after their recalls. The low engagement figures for GM could be a sign of things to come as it works its way through its many issues beyond the original recall in February 2014.

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  • CapVandal CapVandal on May 02, 2014

    TARP was designed to roughly break even and it did. In 2008-2009, the consensus was that all of the disbursement to the auto industry (about $70 billion) was going to go to zero. As it was, New GM Common Stock didn't sell for as much as expected, so it cost $10 billion. And, GM wasn't 'bailed out' .... it went bankrupt. The owners/stock holders received $0. The bankruptcy was done on favorable terms for everyone BUT the stock holders. When you have a huge financial crisis and one of your countries largest manufactures is going bankrupt, then how does it NOT make sense to use government funds to minimize the economic volatility? The bailout of AIG http://www.treasury.gov/initiatives/financial-stability/TARP-Programs/aig/pages/default.aspx ended up with a $22.7 billion profit for the government. Once again, the stock holders/owners were roughly wiped out (lost 92% of their investment). The Treasury made http://www.treasury.gov/initiatives/financial-stability/TARP-Programs/bank-investment-programs/Pages/default.aspx at least $28 billion on the bank investment program. The single most surprising outcome is that Ally Financial aka GMAC is going to end up in the black. http://www.rawstory.com/rs/2014/04/09/treasury-sets-2-375-billion-stock-ipo-to-finalize-bailout-of-ally-financial/ So .... how exactly was TARP a cost to the taxpayer? I have to laugh when representatives who live in districts who will never pay close in taxes to what they collect in benefits (think Baltimore City) -- have the audacity to use the phrase TAXPAYER's MONEY. In most parts of the city, you would be hard pressed to find a single taxpayer. Since all the bailed out companies wiped out the owners/stock holders, who lost between 90% and 100% of their investments -- and the Federal Government made money overall on TARP --- what is this about? The bailout wan't for the owners of the bailed out companies -- it was for the remainder of the country that would have suffered in a deflationary spiral (debt deflation) -- which we saw between 1929 and 1940. And since the Federal Government collects roughly 20% of GDP, including 1/3 of all corporate profits in perpetuity -- the Government is the largest 'stake holder' in the private sector. People are entitled to their own opinions but not their own facts. And the fact is that TARP made money. Banks -- +28 billion. AIG +22 billion Auto -$10 billion The government wasn't giving money away. They were selling exit visas from hell. And even they couldn't lose money on that.

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    • Thelaine Thelaine on May 03, 2014

      @capvandal You have the gift of clarity. I had not seen such a concise summary of the aftermath of TARP, with GM in context. Again, much appreciated.

  • Jimbob457 Jimbob457 on May 02, 2014

    The Fed and the government's management of the 2008-9 auto bankruptcy crisis was pretty good all things considered. Normal Chapter 11 bankruptcy was out of the question. Even if DIP financing had been available (it wasn't), Chapter 11 would have shut down much of the industry for many months while the lawyers and accountants tried to sort things out. Loan covenants and clauses in franchise agreements would have been triggered willy nilly. Suppliers would have gone under. The Great Recession would have morphed into another Great Depression. Even Ford management supported the bailout because a Chapter 11 alternative would have ruined so many of their suppliers. Of course the auto crisis arose in the first place from deep flaws in the corporate cultures of GM and Chrysler, e.g. taking private jets to the meetings in Washington??? To what (if any) extent has this been fixed? That would make an interesting thread.

  • Wolfwagen I see my comment was deleted (BTW nice way to censor) so i will say it again:GTFO here with the pseudo "wealth distribution" BS. A crime is a crime is a crime.Its a slippery slope, what happens next, Jail a rich guy when he kills a pedestrian and let the poor guy who kills a pedestrian walk? What about if the poor guy is a crappy driver and has the record to prove it then what?Or we could go crazy and just institute the death penalty across the board for every driving infraction. That will make people better drivers or stop driving altogether which will make the greenies happy (damm it I just gave them an idea - SOB!!!)
  • Wolfwagen No. Bring back the J80 with an inline six and reduced electronics (i.e. no giant touch screen) and they will probably sell like hotcakes
  • David S. " test vehicles sometimes make sudden stops when uncertain about how to navigate traffic."??? Test vehicles are programmed by humans, HUMANS sometimes make sudden stops when uncertain about how to navigate traffic, Duh!!
  • Frank The last guy was doing fine, this is a sales emergency that they're hoping Tim can fix. They want to hang onto the crazy margins from the covid era, which now in the face of abundant inventory, insane interest rates and inflation are a long distant wet dream. Its time to start offering value again, cash on the hood and 0% financing. Move the metal!
  • Gimmeamanual The new Wrangler isn't that new, it's still a JL and so is limited to what the platform can handle as far as addressing on-road handling. One thing Jeep should have done is increase the length of the front lower control arms by using the ones THEY ALREADY SELL with the Mopar lift. That 1/4" makes a big difference.