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Posts Tagged ‘U. S. Treasury Department’

Taxpayers Will Take Big Losses on Auto Bailouts

Oversight Panel says $81 billion committed is largely at risk.

by on Sep.09, 2009

Click on chart to enlarge.

Click on chart to enlarge.

Taxpayers are not going to recover anywhere near the money they have invested in automakers and their subsidiaries, according to a report just released by the Congressional Oversight Panel.

The Panel, which is investigating  the U.S. Treasury Department’s Troubled Asset Relief Program (TARP), criticizes Treasury’s ongoing lack of transparency about the wildly unpopular auto bailouts.

The latest report follows the money and looks at how tens of billions of taxpayer dollars have been used to support Chrysler, General Motors, GMAC and parts makers.

In protecting the interests of taxpayers, the Panel found that Treasury “negotiated aggressively with all the players,” and now holds a combination of debt and equity in the reorganized Chrysler Group, General Motors Company and GMAC.

  • U.S. taxpayers have lent $49.9 billion of TARP funds in conjunction with GM’s bankruptcy and the subsequent creation of General  Motors Company.
  • The Chrysler transactions have spent $14.3 billion of TARP funding, of which $10.5 billion remains outstanding.
  • Assistance to automotive suppliers and investments in GMAC, the financial institution dedicated to automotive lending, account for another $16.9 billion of TARP resources.
  • Total TARP net support for the U.S. domestic automotive industry is slightly over $81 billion as of September 9, 2009.

A problem comes when  trying to figure out how much of this will be paid back. Earlier Congressional Budget Office estimates said that between 65% and 75% of the money was lost. The estimates, alas, still appear reasonable.

In the latest investigation, Treasury officials told the Panel staff that recovery of TARP investments in the automotive industry would be dependent upon the value of the stock that Treasury holds (or subsequently receives) in the two companies when they are able to go public. Therefore, the prospects for recovery of the TARP investments depend on the forecast for Chrysler and GM stock appreciation, which is something that cannot  be predicted.

However, in discussions with the Panel Treasury agreed with the Panel’s assessment that the new companies’ stock prices will have to appreciate sharply for taxpayers to be fully repaid.

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Chrysler Can’t Sell Viper and Decides To Keep It

Originally the sport car was listed as an asset to be liquidated.

by on Jul.10, 2009

Like Bob Lutz, the Viper he backed is not retiring.

Like Bob Lutz, the Viper he backed is not retiring.

Late this afternoon Chrysler Group LLC announced that production of the Dodge Viper SRT10 and its V-10 engine will continue at the Connor Avenue Assembly Plant, where they have been built since 1995.

In a bankruptcy court filing back in May the company said there was no taker for the sale of the car and its entire Conner Avenue plant for only $10 million, and listed Viper as an asset to be disposed of by the old company. Apparently a bid of some $5 million did not have financing behind it. See Viper video here.

As the bankruptcy proceeded the company changed its mind and transferred the business to the surviving Chrysler Group. These assets, besides the car, consist of a 392,000 square-foot plant in Detroit that occupies 27 acres. There, 115 employees assemble the Dodge Viper SRT10 Coupe and Roadster along with the the V-10 engine. 

It's as fast as a Viper!

It's as fast as a Viper!

There seems to be no downside to continuing for the moment. The Viper business earned $16 million in 2008 by building 1545 cars and engines. However, during 2009 only 120 Vipers have been built thus far in a plant that is capable of building eight cars a day during its single, 40-hour shift.

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Chrysler’s Proposed Viper Sale Has No Takers

Bankrupt company offered the entire plant for only $10 million.

by on May.27, 2009

No takers for the Viper business means sales of other Chrylser and GM brands are difficult, if not impossible.

No takers for Viper means sales of other Chrysler and GM brands are difficult, if not impossible.

In a bankruptcy court filing Robert Nardelli, CEO of Chrysler LLC, says that the company recently offered for sale its entire Conner Avenue plant in Detroit, the facility that manufactures Dodge Vipers and engines,  and the entire Viper business for only $10 million.

The 392,000 square-foot plant occupies 27 acres where 115 employees assemble the Dodge Viper SRT10 Coupe and Roadster and their V-10 engine. The Viper business earned $16 million in 2008.

Chrysler received “no purchaser interest,” in what amounted to a fire sale of the sports car line.

The lack of any interest whatsoever demonstrates just how depressed the market is for automotive assets of any kind, and it has direct implications for General Motors as it struggles to sell its Saturn, Opel, Saab, and Hummer brands to raise cash and trim its bloated product portfolio.

One of the core arguments of bondholders, who oppose the U.S. Treasury Department imposed restructurings of both companies, is that they would be better off if the companies were broken up. If there are no buyers ,then this speculative assertion is demonstrably false, legally allowing the proposed restructurings to go forward.

A hearing is going on right now in the U.S. Bankruptcy Court in  New York as to whether Fiat’s takeover of Chrysler can proceed by transferring Chrysler assets to the Turin-based small car maker over the objections of bondholders and other creditors.

Subscribe to TheDetroitBureau.comIt is Nardelli’s sworn testimony that the objecting bondholders “simply ignore the fact that the U.S. Treasury Department was the only lender willing to invest in us. As credit markets tightened and automotive sales deteriorated in the fall of 2008, Chrysler suffered a severe liquidity crisis. We were unable to obtain financing from banks or other traditional sources. As a result, and as a last resort, Chrysler approached the United States government for financial support,” Nardelli said.    (more…)