Dude, Where’s My $50 Billion?

GM emerged from bankruptcy today.  It was announced with all the expected fanfare, CEO Fritz Henderson saying:  “This is an exciting day for General Motors, one that will allow every employee, including me, to get back to the business of designing, building and selling great cars and trucks and serving the needs of our customers.”  I heard tidbits of his speech on the news this morning, as well as an interview with Frank Langfitt of NPR, who analyzed the announcement.  The show’s host went on to ask Mr. Langfitt:

“… is there any chance the taxpayers are going to get their $50 billion back?”

To which he responded:  “Well, this is a tough one, Steve.  The government has said it wants to get out of GM as fast as it can.  It doesn’t want to be the owner of a big car company. And they are looking to make an initial public stock offering next year.  Now this could be really good for GM – get them out of public ownership, and hopefully any meddling from politicians, but not necessarily so good for us the taxpayer, because as you were just noting before, the company has just come out of bankruptcy.  In order for us to make all that money back, the value of the company would just have to explode in a very short period of time, and that seems highly unlikely, so we’re likely to lose a fair bit of this investment.”  (You can hear the analysis here:  http://tinyurl.com/n4kfd6)

I was surprised to hear this.  You’ll recall that in August last year, GM was promised a $50 billion US Treasury loan for the development of more fuel-efficient cars.  I looked for confirmation that GM was not paying back this loan.  I found the story on CNN, where Mr. Henderson said:  “We deeply appreciate the support we’ve received. We’ll work hard to repay the trust, and the money, that so many have invested in GM.”

I was shocked by the next sentence (but I guess I wasn’t surprised) “But he said he couldn’t promise that GM would repay the $50 billion the government has already given or promised to GM. “Our performance over time will determine if the taxpayers are made whole,” he said.”  (You can read the article here:  http://tinyurl.com/mc3nsp)

Am I the only one scratching my head here?

Tags: bailouts, finance, The economy