Obama Expects Loan Repayment from Automakers

President Obama recently spoke about the government bailout of General Motors and Chrysler during speech in Raleigh, North Carolina. He said, “If GM and Chrysler were willing to do what was necessary to make themselves competitive, and if taxpayers were repaid every dime they put on the line, it was a process worth supporting.”

This past spring the U.S. government loaned the ailing automakers around $64 billion dollars for operations costs to keep them afloat during their restructuring bankruptcy proceedings.

For GM, pre-bankruptcy loans totaling $20 billion were provided by the Bush administration. Additional funds of $50 billion were in the form of loans and other aid for restructuring and exit financing.

Chrysler also received bankruptcy financing totaling over $3 billion and approximately $6 billion in operational loans after bankruptcy. The company received bailout financing of more than $4 billion before bankruptcy proceedings this past spring.

Currently the U.S. government’s stake in Chrysler and GM includes debt-to-equity conversions of the initial bailout funds they owed to the Treasury.

There has been talk of an initial public offering for GM in 2010 which may include new shares as well as the government-held shares. Many financial experts outside the administration are concerned that the government will not be able to recoup its investment in the companies.

Talk of repayment may have been prompted by the huge popularity of the government “cash for clunkers” voucher program. Early numbers released by the Obama administration showed that more than 16,000 vehicles were sold during the first days of the program and Congress has acted to funnel additional money into the program to meet the demand from new car buyers.

$2 billion in additional funding was approved today by the House and will be added to the initial $1 billion originally allocated for the program. The Senate is expected to vote on the issue soon. The CARS program is expected by many in Congress to jump start the ailing auto industry.

Public opinion on the matter is mixed. Rasmussen Reports released a recent survey that found that most of those surveyed are opposed to the auto bailouts. Only 26% of those surveyed said the government takeover of GM was a good idea. When asked if they’d like the government to sell its share of GM as soon as possible, 80% said “yes.”

Posted in In the News

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