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Old 03-11-2010, 08:02 PM   #1
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...bankruptcy if the Obama administration hadn't stepped in to help GM and Chrysler.


Rattner: Michigan saved by fed bailout
David Shepardson / Detroit News Washington Bureau

New York -- Former White House auto czar Steve Rattner said Wednesday the state of Michigan and the city of Detroit would have been forced into bankruptcy if the Obama administration hadn't rescued General Motors and Chrysler last year.

Detroit almost "certainly would have gone bankrupt," said Rattner, who spoke at a bankruptcy conference sponsored by Dow Jones.

"The state of Michigan would have declared bankruptcy."

He said the Obama auto task force was deeply worried about the impact of the liquidation of GM and Chrysler and municipal bankruptcies.

Rattner said the government's $50 billion investment in GM is now worth $40 billion to $45 billion -- a vast improvement over prior estimates that suggested the government would lose $20 billion on its bailout of the Detroit automakers.

Rattner based his revised estimate on GM's better-than-expected performance and the higher value of assets remaining in the old GM.

Some Wall Street analysts also have upped their estimate of what GM will be worth when it holds an initial public stock offering this year or next. The new GM has a much stronger balance sheet with lower fixed costs.

The Treasury Department swapped about $42 billion of its $50 billion investment for a 61 percent equity in the company. GM has vowed to repay the remainder of its $6.7 billion in government loans by June. It also holds $2.1 billion in preferred stock.

Rattner has defended the decision to save the two automakers, noting the hundreds of thousands of jobs that would have been lost if the government had not stepped in.
He noted that GM had taken a "kinder, gentler" approach to cutting its dealers by giving them 18 months to close their doors while Chrysler used a "guillotine" to cut dealers, giving one quarter of its dealers just 30 days to close their doors.
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Last edited by rsholland; 03-11-2010 at 08:14 PM.
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Old 03-12-2010, 08:09 AM   #2
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Alrighty, let's try again.

Stay on topic, and no political nonsense.

We can still discuss the news without interjecting our viewpoints.
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Old 03-12-2010, 08:40 AM   #3
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Default Congressional panel says GMAC has no business plan, suggests break up Read more: htt

One idea is to move auto finance back to General Motors

WASHINGTON -- GMAC Inc. still has no business plan even after receiving a $17.2 billion investment from the government, and the Treasury Department has been lax in making sure that the bank repays taxpayers, a congressional panel said today.

"The panel is deeply concerned that Treasury has not required GMAC to lay out a clear path to viability or a strategy for fully repaying taxpayers," said the Congressional Oversight Panel, which was created to oversee Treasury's spending of Troubled Asset Relief Program funds.

Treasury should consider the possibility of breaking up GMAC and merging its auto-finance unit back into General Motors Co., the panel said in a statement.

That measure would restore GM's financing operations to a model used by a number of other automakers, said the panel headed by Elizabeth Warren, a Harvard University law professor.

GMAC lost $8.3 billion on its mortgage business last year, which amounted to more than 80 percent of its total net losses, the panel's report said.

"We appreciate the panel's responsibility to analyze history; however, GMAC's management team is focused on the future," GMAC said in a statement. "That includes continuing to provide the highest level of service to auto dealers and consumers in support of our auto partners, returning GMAC to a high level of profitability, and repaying the U.S. Treasury."

Treasury, in a statement released this afternoon, said:

"Treasury continues to be a reluctant shareholder and to manage its ivnestment in GMAC in a hands-off commercial manner consistent with the administration's established principles that guide Treasury's management of financial interests in private firms."

As for its past decisions not to restructure GMAC, the federal agency said, "After considerable analysis and deliberation, Treasury viewed the course taken as the least costly and least disruptive of all the options available."

The congressional panel found that the government missed chances to increase accountability and ensure repayment of taxpayers' money with its early decisions to rescue GMAC rather than pursue other options as part of a broader auto industry bailout.

Treasury has said that it was necessary to support GMAC because of the company's dominant role in floorplan financing and that failure to do so would have undermined the government's investments in the auto industry.

In 2006, GM spun its credit arm off into a company that today is the 14th largest bank holding company in the United States.
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