GM: Still $42B in the Hole

Taxpayers on the hook for billions despite Obama’s claims to the contrary

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Despite President Barack Obama’s stories about a resurgent GM ready to repay its bailout tab, the automaker and its former bank still owe taxpayers nearly $42 billion, according to an inspector general’s report.

GM owes $27 billion on the nearly $50 billion it received from the auto bailout and Ally Bank, the company’s lending arm, owes $14.7 billion of the $17.2 billion taxpayer-funded bailout it received.

Obama has promoted the auto bailout as a success story, highlighting the manufacturing jobs it may have saved in swing states such as Ohio and Michigan.

“I refused to turn my back on a great industry and American workers. I bet on American workers. I bet on American manufacturing,” he said at a campaign rally in Oakland. “Three years later, the American auto industry has come roaring back.”

GM’s stock has plummeted in recent months after stagnant development in overseas markets. It hit a new low on Wednesday, falling to $18.80, a 52 percent drop from its January 2011 high of $38.90.

The rapid decline of the stock price has kept taxpayers on the hook for billions in unpaid bailout dollars. The stock would need to make a quick—and meteoric—turnaround for taxpayers to break even.

“In order to recoup its total investment in GM, Treasury will need to recover an additional $27 billion in proceeds. This translates to an average of $53.98 per share on its remaining common shares in New GM,” the IG report concluded.

The federal government has maintained a 32 percent ownership interest in GM, despite promises to sell off its shares after the November 2010 IPO. The administration has also maintained a controlling interest in Ally Financial, formerly known as GMAC.

The administration lost $2.9 billion on the Chrysler bailout, a black eye to Obama’s initial promise that all taxpayer dollars would be recovered. Selling shares in GM and Ally would lead to a multi-billion dollar loss for taxpayers and could damage the Obama campaign’s claim in a March campaign video that the ailing automaker had repaid its loans.

“Because of the tough choices the president made, the stage was set for a resurgent U.S. auto industry,” Tom Hanks said, narrating the 17-minute campaign video titled The Road We’ve Traveled. “With business booming, (GM and Chrysler) repaid their loans.”

Financial experts see the election-year creeping into the decision to hold on to the falling stock.

“Geithner and the rest of Treasury doesn’t want to admit that it is a mess and they’ve been lying to us for three years,” Christopher Whalen, cofounder of Institutional Risk Analytics, told the Washington Free Beacon in April. “They’re waiting until after the election.”

Bill McMorris   Email Bill | Full Bio | RSS
Bill McMorris is a staff writer for the Washington Free Beacon. He joins the Beacon from the Franklin Center for Government and Public Integrity, where he was managing editor of Old Dominion Watchdog. He was a 2010 Robert Novak Fellow with the Phillips Foundation, where he studied state pension shortfalls. His work has been featured on CNN, Fox News, The Economist, Colbert Report, and numerous print publications and radio stations. He is a 2008 Cornell University graduate and lives in Alexandria, Va with his wife Teresa and daughter Olivia. His Twitter handle is @FBillMcMorris. His email address is mcmorris@freebeacon.com.