The recent announcement that the Obama administration plans to throw another $30 billion of taxpayer bailout money to GM in addition to the $19.4 billion that’s already been lent to the drowning giant... doesn't seem at all out of the ordinary.
Either our government is just that good at spinning a story or the steady stream of mind bending news pouring out of the recession has eroded an accommodating lobotomy hole in our brains where numbers like 30 billion can be tucked away like a handful of Skittles. Maybe it’s a combination of the two.
Automotive News called the extra $30 billion, “part of a sweetened offer to bondholders,” that are holding out on GM’s restructuring deal. According to a source familiar with the matter, GM still plans to file for bankruptcy protection on June 1 (1). Most reputable coverage of the story agrees it's inevitable. But look on the bright side - bankruptcy has the potential to be a good thing when it comes to the big three these days.
According to the article referenced above, Chrysler’s sales figures improved for the month of May after the company was finally forced to bite the bullet and file for bankruptcy of their own.
"The Chrysler experience should be cause for some optimism that GM's experience will be similarly efficient," Edmunds.com analysts said in a statement. "The stigma of being in bankruptcy seems to have been vastly overstated." (1)
Nice, but should a polished turd win brownie points for reflecting the sun? Here’s another tasty tidbit that might arouse a few questions:
It was confirmed by an Obama administration official that Chrysler will not repay U.S. taxpayers more than $7 billion in bailout money the company received this year as part of its Chapter 11 protection. (2)
Answer - Instead, the Treasury Department will forgive Chrysler’s $4 billion bridge loan along with the $300 million fee attached to it and the $3.2 billion in financing approved to fund the carmaker’s operations during bankruptcy. From a CNNMoney.com article updated May 6, 2009:
“The reality now is that the face value [of the $4 billion bridge loan] will be written off in the bankruptcy process," said the official, who added that the 8% equity stake that Treasury will be receiving as part of the company's reorganization is meant to compensate taxpayers for the lost money. (2)
"While we do not expect a recovery of these funds, we are comfortable that in the totality of the arrangement, the Treasury and the American taxpayer are being fairly compensated," said the official. (2)
Comfortable? “Official?” Are we taking shots in the dark here? Lumping an extra $30 billion of bailout money on top of the $19.4 billion already given to GM a few days before their restructuring deadline doesn't come off as a well played card.