Thursday, June 11, 2009

Senators seek answers on U.S. stakes in GM and Chrysler

By John Crawley
WASHINGTON (Reuters) - The Obama administration must provide a clear explanation to Congress of how it plans to extricate the government from ownership stakes in General Motors Corp and Chrysler Group LLC, Senate Banking Committee leaders said on Wednesday.
"My hope is whatever we like or dislike about the present configuration, I want to see us get out of this business as quickly as we can," Christopher Dodd, the panel's Democratic chairman, said at a hearing.
Richard Shelby, the committee's top Republican, asked whether taxpayers will make money and if nearly $20 billion in government writeoffs of GM debt so far foreshadow more losses.
Dodd and Shelby's comments represent the first formal public questioning of the administration's rescue of GM and Chrysler.
The U.S. government has taken an 8 percent stake in Chrysler, which is exiting Chapter 11 in an alliance with Italy's Fiat SpA, and a 60 percent investment in GM, which entered Chapter 11 on June 1.
Government aid dedicated to Chrysler totals more than $12 billion while GM has received $50 billion. Billions more in taxpayer funds have been spent to help for affiliated finance companies and suppliers.
Ron Bloom, a senior member of the administration's auto task force responsible for overhauling the companies, said there will be no specific blueprint for shedding ownership because such a strategy could disrupt markets.
"There is no perfect system. It is our judgment at this point that a prearranged time schedule will create more problems than it solves," he told lawmakers.
Bloom said President Barack Obama wants to get out of the auto business "as soon as practicable" but not before GM and Chrysler can demonstrate viability. An exit plan will depend on how GM and Chrysler perform as well as overall economic factors and industry sales.
While there is no guarantee that both automakers will fully repay the government, Bloom said there were "reasonable scenarios" in which taxpayers could recover a substantial portion of their investment down the road.
Senator Jim Bunning said that for taxpayers to break even on GM, its market capitalization would have to reach $70 billion or 15 percent higher than its all-time high at the height of the sport utility sales boom of the late 1990s and first half of this decade.
"It seems pretty clear to me that taxpayers will never get back their money," said Bunning, a Republican from Kentucky.
Bloom said GM's capital structure will be conservative once it is out of bankruptcy, with more room for equity and fewer deductions for debt and other liabilities.
(Reporting by John Crawley, Karey Wutkowski and Mari Saito, editing by Gerald E. McCormick and Tim Dobbyn)

Source: Reuters

No comments:

 

Business

Politics

Incidents

 

Society

Culture