Report: Auto Industry Bailout Could Cost $3.4 Billion More Than Last Estimate
The U.S. Treasury Department’s estimated cost to taxpayers of the 2009 auto industry bailout has just taken a $3.4 billion jump. While the $21.7 billion estimate at the end of May was lower than the earlier $23.8 billion figure, now the treasury department told congress it expects to lose $25.1 billion – up $3.4 billion in just a few months, Detroit Free Press reports.
The new figure is connected to General Motor’s falling stock price, which some have suggested is being affected by the performance of the Opel and Vauxhall brands. GM stock fell 15 percent between the end of February and the end of May to $22.20 while it closed Monday at $20.49. If GM’s stock goes up in the next couple months, expect the next loss estimate to go down again.
In 2009, the federal government provided GM, Chrysler, and Ally Financial (GM’s former finance company) about $80 billion to bail out the struggling companies, to avoid bankruptcy. To date, the treasury department has recouped $37 billion.
Last year, Fiat bought Chrysler’s remaining shares from the U.S. and Canadian governments, paying off all but $1.3 billion of the debt of “Old Chrysler.” GM has repaid about $24 billion through share sales and loan repayment, but the U.S. government still owns about 500 million GM shares. For the government to recoup the remaining $27 billion, GM stock would have to increase to $53 per share. Ally has repaid $5.5 billion of the $17.2 billion it received, though the government still owns 74 percent of the finance company.
Source: Detroit Free Press
By Jason Udy