http://ift.tt/1AbpWu5Final auto rescue tally: Taxpayers lost $9.3 billion
By Brent Snavely, Detroit Free Press 10:56 a.m. EST December 30, 2014
The U.S. Treasury said it recovered $70.42 billion of the $79.68 billion it gave to General Motors, Chrysler auto lending arms Ally Financial Inc. and Chrysler Financial and automotive suppliers.
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Taxpayers lost $9.26 billion on Auto Industry Financing Program
Treasury Secretary: "The cost of a disorderly liquidation ...would have been far higher."
Taxpayers lost $9.26 billion on the U.S. government's automotive industry rescue program, according to a final tally released by U.S. Treasury on Monday.
The government said it recovered $70.42 billion of the $79.68 billion it gave to General Motors, Chrysler, Ally Financial Inc., Chrysler Financial and automotive suppliers through the federal Auto Industry Financing Program. The program was part of the larger Troubled Asset Relief Program, or TARP.
The government lost money, but far less than initially expected when the program was launched in 2009. What's more, the program prevented GM and Chrysler from going out of business an event most economists and automotive analysts said would have caused the entire industry to collapse and thrown the Midwest into a deep depression.
At the time, some critics argued GM and Chrysler should be allowed to fail and that government should not be interfering with the natural course of the market.
"This program was a crucial part of the Obama Administration's effort to stop the financial crisis and protect the economy from slipping into a second Great Depression," U.S. Treasury Secretary Jack Lew said on Dec. 19.
The automotive industry recovered faster than most industries after the Great Recession. Sales of new cars and trucks in the U.S. have increased every year for five years and are on track to top 16.5 million this year the most since 2006.
GM, Ford and FCA US are have all been profitable for several years. All three companies also have hired thousands of workers since 2009.
The government disbursed $49.5 billion to GM through the program, $11.96 billion to Chrysler and $17.17 billion to Ally Financial. As part of the plan, Fiat took control of Chrysler. The companies have since merged, and the new entity is called Fiat Chrysler Automobiles with its U.S. arm called FCA US.
On Dec. 18, the Treasury sold all of its remaining stock in Ally Financial and closed the program. Treasury recovered a total of $19.57 billion from sales of Ally stock, a $2.4 billion profit. Before 2008, Ally was GMAC, the finance arm of GM. In December 2008, it became certified as a bank holding company, a step that made it eligible for the government bailout.
FCA US repaid its loans in June 2011. In December 2013, Treasury sold its last GM shares.
The final tally for the program was included in the Treasury's daily TARP update on Monday.
"The cost of a disorderly liquidation to the families and businesses across the country that rely on the auto industry would have been far higher," the Treasury department said of the expense. "The government's actions not only saved GM and Chrysler but they saved many businesses up and down the supply chain."
Last year, the Ann Arbor based Center for Automotive Research estimated that the U.S. would have had 2.6 million fewer jobs in 2009 and 1.5 million fewer jobs in 2010 if the two auto companies had disappeared. The study also estimated the government "saved or avoided the loss of" $105 billion in lost taxes and social service expenses, such as food stamps, unemployment benefits and medical care.