With repayments like Chrysler’s, who needs debts?

All hail Chrysler, which said Tuesday that it had repaid $7.6 billion in loans from the U.S. and Canadian governments! It’s all the money that taxpayers loaned the company!

Um, as long as you don’t count the rest of the money. Where have we heard this before? Oh, that’s right.

Using Government Loan B to repay most of Government Loan A, while rendering the rest of Government Loan A to the memory hole, worked so brilliantly for GM that Chrysler apparently decided it would try the trick as well. And, judging by the fawning reaction from liberals who decry corporate handouts unless they make President Obama look good, the trick worked brilliantly again.

But in case you’re interested in what’s really going on here, Edward Niedermeyer at The Truth About Cars explains:

It was ultimately up to Ron Bloom, the White House’s defacto “car czar” to admit that Chrysler’s “payback” amounted to only 85% of the “total money loaned to Chrysler.” That math works out to the conclusion that Chrysler failed to pay back about $2b … which is as technically true as Marchionne’s “every penny that had been loaned less than two years ago” line. It does, however, fail to account (again) for the $1.9b Debtor-in-Posession “loan” which financed Chrysler during bankruptcy and was conveniently left to die with the remains of “Old Chrysler.” Nor does it account for the $1.5b loaned to Chrysler’s suppliers to keep them afloat amidst the bailout chaos. Meanwhile, the $1.9b Chrysler that Bloom admits Chrysler still “owes” the taxpayers is covered by a 6.6% stake in Chrysler’s equity, which isn’t likely to cover that loss when Chrysler eventually launches an IPO … and the DIP loan and supplier aid are irrevocably lost. …

Add up the outstanding “bridge loan” loss of $1.9b, the “Old Chrysler” DIP loan loss of $1.9b and the supplier aid loss of $1.5b, and the taxpayer’s loss on Chrysler looks to be closer to $5.3b. Add $3.4b of that into the $12.5b bailout bill that Treasury acknowledges, and the total return on the Chrysler bailout appears to be more like 66%, not 85%. Which is pretty damn far from “every penny” no matter how you cut it. (links original)

And on top of all that, Niedermeyer reported more than a month ago that $3.5 billion of the money that was repaid was available to Chrysler and its controlling stakeholder, Fiat, because of a new $3.5 billion loan from the Department of Energy.

Now, technically the DOE loan program is supposed to be used for specific, qualifying retooling projects, so Fiat can’t literally take the DOE money and use it to pay back the government loans. But freeing up $3.5b in capital that would otherwise be spent on retooling with low-cost loans will make it infinitely easier for Chrysler to secure the $3.5b in debt refinancing it needs. And, in light of the GAO’s pointed criticisms of the DOE loan program’s fairness and transparency, it’s hard to overlook the coincidental nature of Chrysler’s need for $3.5b and the government’s allocation of extra funds to apparently guarantee a low cost loan to Chrysler for precisely the same amount. After all, we’ve seen this movie before …

Yes, we have. And, predictably enough, the same people who liked it last time like it this time — and the people who didn’t, don’t.

– By Kyle Wingfield

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60 comments Add your comment

GTT

May 25th, 2011
10:54 am

Think Bookman will comment on your post?

Jefferson

May 25th, 2011
11:08 am

Had you rather they not pay anything back so you could shoot at the President ?

ByteMe

May 25th, 2011
11:18 am

Niedermeyer fails with this one sentence:

“Meanwhile, the $1.9b Chrysler that Bloom admits Chrysler still “owes” the taxpayers is covered by a 6.6% stake in Chrysler’s equity, which isn’t likely to cover that loss when Chrysler eventually launches an IPO”

He knows this… how? Same way that everyone knew that AIGs losses wouldn’t be covered by stock sales… and yet the first US Treasury stock sale of AIG was above the level that was required to get our investment back?

Kyle, you need to do better than to just “liberally” quote from a blogger with “truth” and “cars” in his blog name. Maybe instead focus on someone who can really handle financial stuff.

Screwy Louie

May 25th, 2011
11:22 am

@ByteMe

May 25th, 2011
11:18 am

Better get back over to Bookmans place before his band of loonies finds out you’re AWOL :-)

Kyle Wingfield

May 25th, 2011
11:27 am

I dunno, ByteMe. Maybe it’s because getting $1.9B out of a 6.6 percent stake would require the company to have a total market cap of about $28B, whereas the company told the SEC that its value at the close of 2010 was $4.8B.

http://www.reuters.com/article/2011/03/08/us-chrysler-value-idUSTRE72709P20110308

Joel Edge

May 25th, 2011
11:28 am

Bart Abel

May 25th, 2011
11:35 am

Even if we agree that Chrysler paid back 85 percent of the money loaned, I’d say that’s pretty good. I suspect that if we count the thousands of jobs that would have been lost had Chrysler gone under, our economy and our government would have lost a whole lot more.

Look, when others lose their jobs or get furloughed or get pay cuts, then we’re all hurt. Neither my wife nor I lost our jobs or received pay cuts during the economic crisis. But our house lost over $50,000 in value because of the economy. To be clear, it’s only a paper loss. But one day, we’ll sell the house, and we’ll be $50,000 poorer than we otherwise would have been. So that’s the minimum that the 10+ unemployment rate in Georgia has cost us.

I’m not complaining. We’re the lucky ones. The point is that we really are all connected. If the three big automakers were closed, their suppliers, their dealers, and so on, then my loss would have been bigger. If the teacher is out of work, then her family stops eating out. So the waiter gets laid off, and he gives up his photography hobby. Then the camera store lets somebody go and she stops taking her clothes to the drycleaner. Then the dry-cleaner skips a payment or two on his house and the value of his neighbor’s houses fall.

We have to stop being short-sighted. Cobb County just refused to raise the millage rate such that those in a $200,000 home wouldn’t have to pay approximately $40 more per year, give or take. Instead, they’re laying employees off and furloughing others. They’re increasing class sizes, reducing the length of the school year, cutting into budgets for police and the courts. These cuts will do more financial damage to my household than if the County had just raised the rate on a house that has recently declined in value by $50,000.

Anyway, I’m glad President Obama used Bush’s TARP money to save Chrysler and GM. We got most of it back. However, even if we didn’t, by saving those jobs, we got more back in a multitude of ways that aren’t measured in pieces like Niedermeyer’s above.

Screwy Louie

May 25th, 2011
11:37 am

The culture of corruption: Democrat Party presidential candidates and their last winner, too.

Report: Feds to indict John Edwards

reebok

May 25th, 2011
11:38 am

If Obama had ‘let ‘em fail’ he would have been the anti-business socialist who destroyed the amercian economy. And because he bailed them out successfully, he’s the tax-and-spend socialist who wasted the taxpayers’ money on a foolhardy scheme. Seriously, you wingnuts are amazing.

RGB

May 25th, 2011
11:41 am

Gee, when Kyle mentions the market capitalization that would be necessary for Chrysler to make taxpayers whole, the complainant goes silent.

At least the guy was smart enough to stop digging.

Nice response.

Don't Tread

May 25th, 2011
11:55 am

This is all window dressing to make the bailouts appear “successful” to the stoopid. (With two Os)

The people who know better ain’t buying into this BS pile (or Chryslers, for that matter).

Kyle Wingfield

May 25th, 2011
12:00 pm

Bart and reebok: Y’all are repeating the common but misguided trope that the choice was between a bailout or a shutdown. All that most of us asked for at the time was for the companies to go through a normal bankruptcy proceeding — which would have kept the companies’ doors open, albeit in a more modified and, yes, probably slimmed-down fashion — rather than the bastardized version of bankruptcy that was done instead because that’s what the UAW wanted.

I will, however, say that Bart’s argument is at least more intellectually honest than the White House’s spin that taxpayers are being made whole.

DannyX

May 25th, 2011
12:02 pm

“The culture of corruption: Democrat Party presidential candidates and their last winner, too.”

Edwards career as a Democrat is over. He needs to become a Republican, move to Georgia and run for Governor to save his political career.

As for Chrysler, they should just lie and say they are in the oil business.

RGB

May 25th, 2011
12:04 pm

Each American citizen has a $383,000 government debt hanging over their head.

Why, with that indebtedness, you can’t even buy a pair of Reeboks with that.

But leftist-statists can buy a reebok at the ballot box.

Thulsa Doom

May 25th, 2011
12:16 pm

My intuition tells me that somehow or another Jay Bookman is going to have a different take on this.

Intown

May 25th, 2011
12:17 pm

I think the average American won’t really care about the details. You either like Obama for saving the domestic auto industry or you don’t like Obama for using government money to save the domestic auto industry. I think more people will like the fact that thanks to Obama, we still have a domestic auto industry. But, this is a good column for representing the conservative perspective nonetheless.

Bart Abel

May 25th, 2011
12:23 pm

I should have been more clear. I’m glad President Obama used Bush’s TARP money to save Chrysler and GM from bankruptcy. A situation in which, under any scenario, debtors would not have been repaid, suppliers and dealerships would have been closed, and thousand, perhaps tens of thousands or hundreds of thousands of jobs would have been lost. In addition, in that economy, these companies might very well have gone out of business entirely.

This implication that these bailouts were some kind of payoff to the UAW is speculation that I don’t buy into. As I said, the economy benefited, we all benefited, and that’s all the reason the President needed.

Jefferson

May 25th, 2011
12:29 pm

One thing for sure, you can tell who is a pud and who cares about the country.

Ivan

May 25th, 2011
12:33 pm

“Even if we agree that Chrysler paid back 85 percent of the money loaned, I’d say that’s pretty good.”

If only my debt collectors thought the same way.

“All that most of us asked for at the time was for the companies to go through a normal bankruptcy proceeding”

That would have cost them more money though, so it’s better to stick it to the taxpayer. Like the post above, they’ll forgive and forget if it means they can wave their Dem or Rep fan card around.

My question is, since the problem wasn’t fixed; just more money thrown at it, how long until we’ll be asked to bail them out again?

jt

May 25th, 2011
12:56 pm

The American tax-payer will NEVER be paid back..
.
The price for subsidizing junk, corruption, and inefficiency will cost us MORE in the future.

Lil' Barry Bailout

May 25th, 2011
12:57 pm

Companies that can’t make it without bailouts are using up resources, including labor, that could be put to more productive use elsewhere. Therefore, we’re all poorer in th long run because of bailouts. Unfortunately, politicians don’t think past the next election. Which also explains why it will take a Greece-style crisis before politicians will address our out-of-control government spending.

TGT

May 25th, 2011
1:02 pm

Kyle: Thanks for straightening Bookman and his ilk out on this matter. Just as when some libs try to celebrate a govt. success on the GM bailout, I knew the true tale would get out. Glad to see that you set them straight so quickly.

Screwy Louie

May 25th, 2011
1:05 pm

Thulsa Doom

May 25th, 2011
12:16 pm
My intuition tells me that somehow or another Jay Bookman is going to have a different take on this.

Bookman is jounalistically dishonest and a shill for the Democrat Party. He has a bigger following of like-minded rubes, but they have nothing else going on as some of them are on his blog all day, every day and well beyond happy hour and the point of cogent conversation.

Linda

May 25th, 2011
1:14 pm

Companies who are TBTF (Too Big To Fail) know that they will be bailed out by the govt./taxpayers. They CAN’T fail, no matter how much risk they take. Therefore, they indeed take on more risk & behave differently than those not TBTF. Bailouts cause further risky behavior. Rules are broken & wiped out. There is no more fear. Bailouts are fake fixes. The problems that caused failure are still there. The first TBTF bank bailout was in 1984. Bailouts show partiality & crony capitalism.
In the economy, it’s called moral hazard. In the home, it’s called enabling.

http://en.wikipedia.org/wiki/Moral_hazard

Lil' Barry Bailout

May 25th, 2011
1:18 pm

Linda rocks!

Rockerbabe

May 25th, 2011
1:19 pm

Big deal, so what? The money is being repaid and the refinancing is going through via private investors? Isn’ that what the GOP wants? You folks aren’t happy about anything! You didn’t like the loan to begin with, even though the company was just as much a victim of the bankers’ economy as the rest of the unemployed and now you complain because the loan is being repaid? You need to go on a long vacation and just not come back.

Linda

May 25th, 2011
1:20 pm

In 7/10, GM bought AmeriCredit, a large subprime lender. It had an 8.3% loss (default) rate right before the purchase. They are making loans of up to 109% loan-to-value ratio on depreciating assets with an average interest rate of 17% but as high as 30% for up to 72 mts.
The American taxpayer is on the hook AGAIN for the possible failure of subprime loans.

ByteMe

May 25th, 2011
1:25 pm

Kyle, are you trying to sell me (not a misspelling :) ) that a company with a value of $4.8 billion (not a market cap, but a value) can’t become a company with a $28B market cap? Anyone really think Google’s assets are valued exactly (or even close) in its market cap?

Really? Not buying. Like I said: get a financial guy intead of a car blogger to provide your facts.

Kyle Wingfield

May 25th, 2011
2:15 pm

Rockerbabe: If you’d read the piece, you’d know I’m not complaining that they’re repaying the loans…I’m complaining that they’re *saying* they’re repaying the loans when in fact they aren’t.

ByteMe: And I’m not buying the idea that Chrysler’s market cap will be six times its present valuation. In any case, I don’t see why your disagreement with one of his opinions should undermine the facts that he reported…and I don’t see you trying to argue that he was wrong about how much Chrysler still hadn’t repaid, or how it got the money to repay what it has.

Jefferson

May 25th, 2011
2:16 pm

After President Reagan, S&L bailout: after President Bush banks and automaker bailouts. The GOP has a history of leaving the US in a big mess if you give them power.

RAMBLE ON!!!

May 25th, 2011
2:20 pm

Bart Abel, please explain FORD who turned down this “job saving” bailout?

RAMBLE ON!!!

May 25th, 2011
2:20 pm

or anyone else for that matter…

ByteMe

May 25th, 2011
2:37 pm

Kyle,

I’m not trying to argue that, so that’s why I didn’t bring it up. I don’t know all the ins and outs of these loans and neither does he, near as I can tell. And you don’t have to buy that its market cap could be 6x its intrinsic asset value (which is, for all we know, how it was valued for SEC and tax purposes), because you’re not being asked to make that investment at this point and neither is any other investor. When it happens, we will surely talk about it then.

And your buddy Jay B. has a good takedown in his latest blog thread about why it’s incomplete to just analyze the amount spent/recovered in loans and completely ignore the savings in unemployment insurance and pension guarantees that would have cost the taxpayers even more. Seems some pundits see what they want and ignore the rest as being outside of scope.

Linda

May 25th, 2011
2:53 pm

This is the long list of countries & the amts. the US owes money to with a total of $4.479.2 T. It does not include the Federal Reserve nor entities in the US. Note at the bottom that Oil Exporters include Venezuela, Iran & Libya.

http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt

buck@gon

May 25th, 2011
2:58 pm

I posted on the Jay’s column too. Unfortunately, the truth here is also that Chrysler’s reorg resulted in over 10,000 layoffs. layoffs which now are evidently benefitting only “fat-cats” on Wall Street–to borrow a liberal phrase. Chrysler probably does not have much time left anyway. It can not compete in the smaller-car market with Ford and GM, and it has a disadvantage with its lagging technology in electric cars. What models does it have that are popular?

The other tragedy is that the Bookman story is the narrative for CNN, the NYtimes, NPR and other liberal feel-good news services. The car company bailouts will serve to weaken the industry long-term, to strengthen crony-capitalism by an administration supposedly famous for eschewing it, to lengthen and extend the role that unions have in running and threatening businesses.

I wrote that I think Jay should be a jester for saying that the car company bailout was a success. It’s just the story you want to write, if you’re trying to play-ball with the Chicagoland Obama administration.

Kyle Wingfield

May 25th, 2011
3:01 pm

ByteMe: Now we’re back to the idea that anything other than the bailout would have led to the closing of Chrysler, GM and their suppliers, and thus the loss of hundreds of thousands of jobs. As I wrote in an earlier comment, I think it’s fallacious to assume that it was a bailout or a shutdown. Plenty of companies have come through normal bankruptcy proceedings intact — smaller, to be sure, but intact and still operational. There’s no good reason Chrysler and GM couldn’t have joined that list.

buck@gon

May 25th, 2011
3:05 pm

“completely ignore the savings in unemployment insurance and pension guarantees that would have cost the taxpayers even more. ”

Byteme,

OK, I’ll byte on that one. Chrysler laid off over 10,000 people DESPITE the bailout!

You are living in a fantasyland if you think that there was “savings” because some people were kept employed just to make work, so that government wouldn’t have to rescue them. The pensions were guaranteed anyway, additional money was given to Chrysler as Kyle has shown (bailout 3, though not labeled as such).

What am I missing?

Linda

May 25th, 2011
3:11 pm

buck@con@2:58, It’s not a coincidence that the corrupt alphabet media you mentioned are on the same page, so to speak. They are organized. Do you know who George Soros is?

Screwy Louie

May 25th, 2011
3:15 pm

Edwards career as a Democrat is over. He needs to become a Republican, move to Georgia and run for Governor to save his political career.

That sissy couldn’t make it in either, the party or the state.

Lil' Barry Bailout

May 25th, 2011
3:25 pm

Anyone really think Google’s assets are valued exactly (or even close) in its market cap?
———-

Unlike Chrysler, Google has products and services that people want. Stock prices are all about expectations of future profits, not lines on a balance sheet.

Linda

May 25th, 2011
3:26 pm

Will the Democrats try to bail out the states? If the Republicans stand in the way, will the Federal Reserve once again crank up the presses & print more money out of thin air?
The states owe the fed. govt. $42 B. The states & local governments have $2.8 T of outstanding bond debt & $3 T of unfunded pensions & health care liabilities.
There will be $21 B in unfunded mandates imposed on the states by Obamacare between ‘14 & ‘19. If the fed. govt. can’t afford what it has promised, the states’ tab would increase by $200 B ($33 B per yr.) thru ‘19 instead of the $21 B–on top of the $224 B without Obamacare.
We are in a world of hurt.

http://blog.getliberty.org/default.asp?display=2943

Ivan

May 25th, 2011
3:27 pm

“…Chrysler, GM and their suppliers..”

That’s what gets laughing me every time. Suppliers had a larger chance of success than GM and Chrysler had. GM and Chrysler aren’t the only automotive companies. And the suppliers would have modified and adapted to provide for another industry if need be. Cuts would have been made, sure, but they would have avoided the financial meltdown GM and Chrysler put on themselves.

Linda

May 25th, 2011
3:37 pm

Kyle, Has anyone ever disappeared mysteriously in the middle of the night after posting on your blog?

ByteMe

May 25th, 2011
3:43 pm

ByteMe: Now we’re back to the idea that anything other than the bailout would have led to the closing of Chrysler, GM and their suppliers, and thus the loss of hundreds of thousands of jobs. As I wrote in an earlier comment, I think it’s fallacious to assume that it was a bailout or a shutdown. Plenty of companies have come through normal bankruptcy proceedings intact — smaller, to be sure, but intact and still operational. There’s no good reason Chrysler and GM couldn’t have joined that list.

That only works, Kyle, if there’s anyone willing to put up money to keep the business going during bankruptcy. No one … absolutely NO ONE when banks were not lending money to anyone … was willing to put up the money. They looked! No one was lending. So the government became the financer of last resort for the two companies. I’ll grant that Chrysler could have shut down and it would not have been a crisis, but not GM, which was much much larger and BOTH would have shut down the auto parts suppliers — many of whom also supply Ford — and put them out of business as well. And their pensions would have fallen to the PBGC, which is backed by taxpayers.

But you can assume that everything would have come up roses by letting the market kill off both companies. I don’t share that view at all. Sometimes you have to look at a bigger picture and go with the path of least real (instead of imagined) damage.

Save your outrage for how the banks were bailed out without enough strings and without giving their bondholders a haircut. That’s the real outrage, not Chrysler or GM, which both had to go through bankruptcy, lose their deficient boards, and wiped out their stockholders value.

Yippee

May 25th, 2011
3:43 pm

Some crawl back under their rock until morning.

ByteMe

May 25th, 2011
3:46 pm

buck: as you harp on the 10,000 jobs lost regardless of the bailout, consider this:

Chrysler added 4,300 jobs last year, ending 2010 about 600 shy of its 2008 employment level of 52,200. It also plans to hire 1,000 more.

http://www.freep.com/article/20110511/BUSINESS01/105110429/GM-Ford-Chrysler-adding-jobs-near-pre-crash-employment-levels

Facts are your friend. Real facts. Not “truthiness”.

Linda

May 25th, 2011
4:11 pm

The Congressional Oversignt Panel released its final report on the Troubled Asset Relief Program. Some of the problems it noted were:
*Continued distortions in the market because of TARP
•Public anger towards government officials who designed and administered TARP
•Lack of transparency and accountability on the part of TARP
•Exascerbating “too big to fail” by protecting large banks from failure
•Magnifying moral hazard
•Higher cost of funds for smaller banks than for the largest banks

http://lawprofessors.typepad.com/banking/2011/03/congressional-oversight-panel-findings-about-the-tarp-program.html

TARP never bought one single troubled asset. Too Big To Fail (TBTF) are even bigger.
(Herman Cain would call them TBFTB (too big for their britches).

Lil' Barry Bailout

May 25th, 2011
4:12 pm

Going through a normal bankruptcy wouldn’t have handed ownership of the companies to Obozo’s union thug supporters. This was all just a political payoff by the most criminal regime ever in our history.

Cobbian

May 25th, 2011
4:24 pm

You can make some sort of rational argument for how bad the Department of Energy “loan” was only if you also condemn the subsidies paid to oil companies who made $35 billion in profits in 1 quarter or to the billions spent on farm subsidies. Or, to the $1.6 million Cobb County got to study transportation options from Austell to mid-town Atlanta. Or, to see programs (but not cost) of the U.S. Army each year that are geared to everyone from age about ten and up – go here: http://www.guidanceconsortium.com/pdf-files-military/EducationResources/ArmyEducationPrograms.pdf . Heaven help us all – the waste!

I actually think, Kyle, that we would do better to focus our tax dollars on a few needed programs rather than scatter them all over the place with no real coherence. All this “stuff” is just there to let some elected politician bring home some bacon. And the problem with bacon is that it is mostly unhealthy fat. so, condemn equally the oil tax breaks and the farm subsidies along with Department of energy “loans” – and maybe you will really be a conservative.

Linda

May 25th, 2011
4:32 pm

Lil’, It was nothing more than a union bailout. When Obama talks about teachers, firefighters & police officers, he really means unions. When he says we need to invest in infrastructure, he really means unions. The Education Dept., Labor Dept. & NLRB are union depts.