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  • Automakers to Taxpayers: Can We Get Another Bailout, Please?

    A recent GAO report warns that GM and Chrysler may need even more taxpayer money. This comes after GM and Chrysler received the overwhelming bulk of an $81 billion auto bailout under TARP.

    The report finds GM and Chrysler may have unfunded liabilities for their pension programs. These obligations could have been terminated if these companies had filed for a typical bankruptcy. They were maintained, however, after the government assumed sponsorship during the most recent crisis. Should these companies be unprofitable, these unfunded liabilities will be unmet by GM and Chrysler as soon as 2013.

    The report explains why:

    Officials at the Department of the Treasury, which oversees TARP, expect both GM and Chrysler to return to profitability. If this is the case, then the companies will likely be able to make the required payments and prevent their pension plans from being terminated. However, if GM and Chrysler were not able to return to profitability and their pension plans were terminated, PBGC would be hit hard both financially and administratively.”

    Should these companies continue to face losses, GAO estimates that for years 2013 and 2014 pension liabilities could cost GM over $12 billion, and Chrysler over $2 billion, to combine for “about $14.5 billion” picked up by PBGC. And that’s only by year 2014. It’s likely taxpayer money will be needed for future years.

    Further, the GAO explains:

    …until Treasury either sells or liquidates the equity it acquired in each of the companies in exchange for the TARP assistance, its role as shareholder creates potential tensions with its role as pension regulator and overseer of PBGC in its role as pension insurer. In particular, tensions could arise if decisions must be made between allocating funds to company assets (thereby protecting shareholders, including taxpayers) or to pension fund assets (thereby protecting plan participants).

    In other words, another bailout is all but inevitable, the only question is whether taxpayers will take the hit through TARP or through the PBGC.  Considering the Obama administration’s big labor ties, expect the PBGC to take the hit.

    Posted in Economics [slideshow_deploy]

    7 Responses to Automakers to Taxpayers: Can We Get Another Bailout, Please?

    1. Phil, South Bend ,IN says:

      These bailouts have to stop. These companies have been failing long enough. If they were going to recover they have missed the opportunity. The thing that bothers me the most is all of the GM commercials constantly bombarding us on a large number of channels on satellite and cable. If GM has a large amount of pension liability problems, then this expenditure proves they obviously do not have their priorities in order and need to fail. The government has shuffled around CEO's on down, product lines and divisions with the same results. Chrysler seems to be making more of an effort. I am hoping Fiat can take the reigns away from the government and turn Chrysler around. However like GM Chrysler's pension problems had to be known when the bailouts started. Why is this just now coming to light? This needs to be independently investigated in both companies.

    2. Pingback: GM & Chrysler: BAILOUT$ W/ LEATHER | Clarion Advisory

    3. Pingback: » Financial News Update – 04/13/10 NoisyRoom.net: There are two ways to conquer and enslave a nation. One is by the sword, the other is by debt. John Adams

    4. Carey, TX says:

      Let the market forces speak. Let them fail. Let the profitable companies fill in the gaps. I don't want my tax money subsidizing autos anymore when there are other problems needing to be addressed. I say take that bailout money and retrain the workers for other jobs that have low potential for outsourcing. Manufacturing is dead in the USA and the knowledge work is being outsourced as the icing on the cupcake of outsourced manufacturing. I guess if I want a job, I will need to follow them to India and China. If you want to get an interesting spin on that dynamic, subscribe to the Indian Business news on line, they are practically salivating at the capitalist opportunity that the US Healthcare bill is going to provide them in terms of a boosted economy. Yes, Mr. Obama will be creating lots of Health care jobs, just know that many of those jobs will not be in the Unites States.

    5. Pingback: Some of the headlines you may have missed… « Cubachi

    6. Reese, Myrtle Beach, says:

      The conflicts are not limited to pension benefit guarantees, though those are excellent and valid points. What about the conflicts inherent in the same government that owns GM and Chrysler also regulating the OTHER auto manufacturers (and, in fact, recently handing down a fine of Toyota in the multiple millions of $$$$).

    7. Sharon Oakdale, Ct says:

      the environmental hoax along with the unions(they are socialist) was the communist's plan to take the auto giant down!! They also have infiltrated our congress and then they (illegally) appointed unelected officials to regulate, mandate, subsidize and tie us up so tight they can do what they are doing TO US right now!!!!! They do not care what we say! This is tyranny!! We must expose who these progressives are and go back to our founding fathers principles of self government.!! Look, they taxed the farmer out of existence (DOA) and our industrys are gone!!!. We need conservatives in office that are not concerned with growing government!! These unelected officials(FDA, EPA, DEA etc.) have taken We the People's power away! and we are paying for them!!! Just like the unions did to GM!!! we have no jobs because industries are taxed so high they will actually go to another country to run their company. Look what they are doing to the airlines! and the fisherman!! that is why doctors and medicine cost so much we cannot afford. because the government regulation!!!! Gasoline prices go up because of government taxation! not because of any other reason but the progressives inside our government (communists) that are taking over our government offices and passing laws that we(the people) are not voting or having a say in! the fannie and freddie are the governments way of getting hold of our money and we have to pay for their immoral acts and assaults on us!!!!! the debt is ON PURPOSE TO TAKE OUR COUNTRY DOWN TO OUR KNEES!!!!!!!!!!!!!!!!!

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