NCPA - National Center for Policy Analysis


September 10, 2009

Taxpayers face losses on a significant portion of the $81 billion in government aid provided to the auto industry, according to report.  The Congressional Oversight Panel (COP) did not provide an estimate of the projected loss in its latest monthly report on the $700 billion Troubled Asset Relief Program but it said most of the $23 billion initially provided to General Motors Corp. and Chrysler LLC late last year is unlikely to be repaid.

The prospect of recovering the government's assistance to GM and Chrysler is heavily dependent on shares of the two companies rising to unprecedented levels, the report said. The government owns 10 percent of Chrysler and 61 percent of GM. The two companies are currently private but are expected to issue stock, in GM's case by next year.

The shares "will have to appreciate sharply" for taxpayers to get their money back, the report said.  For example:

  • GM's market value would have to reach $67.6 billion, the report said, a "highly optimistic" estimate and more than the $57.2 billion GM was worth at the height of its share value in April 2008.
  • And in the case of Chrysler, about $5.4 billion of the $14.3 billion provided to the company is "highly unlikely" to ever be repaid, the panel said.
  • Treasury Department officials have acknowledged that most of the $23 billion provided by the Bush administration is likely to be lost.
  • But Meg Reilly, a department spokeswoman, said there is a "reasonably high probability of the return of most or all of the government funding" that was provided to assist GM and Chrysler with their restructurings.

Administration officials have previously said they want to maximize taxpayers' return on the investment but want to dispose of the government's ownership interests as soon as practicable.

Other agencies have also projected large losses on the loans and investments provided to the industry. The Congressional Budget Office estimated in June that taxpayers would lose about $40 billion of the first $55 billion in aid.

Source: Christopher S. Rugaber, "Taxpayers face heavy losses on auto bailout," Associated Press, September 9, 2009.

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