Taxpayers Unlikely To Get GM And Chrysler Investment Back

Taxpayers will probably not get the tens of billions of dollars that they put into Chrysler and GM back, ever. That is the opinion of the Congressional Oversight Panel. The committee also expressed concerns that the Administration may not be disclosing what it knows about the two companies and their future prospects. As owners, the COP argues, taxpayers should know what is going on.

Treasury put $81 billion into the two firms, and, unless the global car industry takes a miraculous turn for the better and sustains record sales for years, recouping that sum is virtually impossible. Ford (F), which is arguably more successful than its two peers, has a market cap of $24 billion. The company does carry debt, but so do Chrysler and GM.

All of the auto companies that do business in the US face consumers who are reluctant buyers, especially now that the “Cash for Clunkers” program is over. Recent Fed data shows that consumer credit is falling at record rates. That does not bode well for people making significant purchases.

The American car owner has  also developed the habit of keeping his car longer, perhaps until it breaks down completely. This change in the buying cycle does not favor manufacturers.

GM has a significant presence overseas and its sales in China are particularly impressive. Whether that can offset its ongoing trouble in the US is open to question. Chrysler, which has had a tough a year in the domestic market as any car company, sells relatively few vehicles outside the US.

The taxpayer might as well find the best deal he can on a new American car. That is as close as he will get to doing well on his investment in Detroit.

Douglas A. McIntyre