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Auto Bailout Cost $14 Billion

June 2, 2011
3 min to read


WASHINGTON — The White House said Wednesday that taxpayers could lose roughly $14 billion of the money spent on auto industry bailouts, despite the industry's recent recovery.


The White House cites the potential losses in a report, "The Resurgence of the American Automotive Industry," released ahead of President Barack Obama's trip Friday to a Chrysler Group LLC facility in Toledo, Ohio.

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The report said that of the $80 billion in bailout money supplied to the auto industry, less than 20 percent, or $16 billion, ultimately may be lost, reported The Wall Street Journal. That's down from the 60 percent loss projected two years ago, the report said. The White House's top auto and manufacturing adviser, Ron Bloom, later specified the loss at closer to $14 billion.


While "there is no joy" in acknowledging that loss, the bailout succeeded in saving jobs and preventing a broader industry collapse, Mr. Bloom said.


"So while we are obviously extremely conscious of our obligation to get every penny we can for the taxpayer, we're also not going to apologize for the fact that there are literally hundreds and hundreds of thousands of Americans who are working today" because of the bailouts, he said.


The U.S. could lose more than $10 billion in General Motors Co. alone if the government sold its remaining shares of the auto maker at current share prices.


The Obama administration has signaled it wants to divest its remaining GM shares within the next few months. Under terms of GM's November initial public offering, the U.S. Treasury could begin selling additional shares of its GM holdings as of late last month. Mr. Bloom said Wednesday the administration has not settled on a price or date for selling its remaining shares, but said the administration may accept a loss.

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"The president has made clear that he does not believe that is the proper role of government in the long term to be an owner of a private corporation," Mr. Bloom said. "And so we do not view ourselves as kind of market timer looking for the absolute best opportunity to sell."


The White House report said the money invested in GM and Chrysler ultimately saved the government tens of billions of dollars in direct and indirect costs, including the cost of unemployment insurance and lost tax receipts that the government would have incurred had the big Detroit auto makers collapsed. Since GM and Chrysler emerged from bankruptcy, the industry has created 115,000 jobs, its strongest period of growth since the late 1990s, the report said.


Mr. Obama's Toledo trip and the White House report are part of a broader Democratic effort to turn the industry bailout into a political advantage, particularly in Midwestern states that were hit hard by the recession and could provide key support for the president's re-election bid in 2012.


Treasury still holds 6 percent of Chrysler and is in discussions now to sell its remaining shares to Italian auto maker Fiat SpA, which now controls the Auburn Hills, Mich., auto maker. Fiat said last Friday that it hopes to exercise an option to buy the Treasury's remaining shares within 10 days.


The White House report also comes as the U.S. industry's sales have hit a lull. U.S. auto sales declined in May, in only the second significant slide since the fall of 2009, as short supplies, higher prices and economic worries weighed on demand, auto companies said Wednesday.

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While most of the government's money flowed to GM and Chrysler as they underwent bankruptcy reorganizations, auto finance and parts suppliers also received aid.

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