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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