GM Faces Long Odds In Paying Back Its Bailout

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General Motors CEO Fritz Henderson i

General Motors Chief Executive Fritz Henderson says the outlook is OK for the automaker even though sales in September were far below what they were a year ago. Philippe Lopez/AFP/Getty Images hide caption

toggle caption Philippe Lopez/AFP/Getty Images
General Motors CEO Fritz Henderson

General Motors Chief Executive Fritz Henderson says the outlook is OK for the automaker even though sales in September were far below what they were a year ago.

Philippe Lopez/AFP/Getty Images

A year ago this week, the U.S. government took the unusual step of bailing out some of the country's largest banks. The government has actually made some money off its $700 billion investment — about $10 billion so far.

The results are less clear, though, for the taxpayer investment in General Motors.

So far, the federal government has put a total of $50 billion into GM. Initially, the aid was supposed to help GM weather the storm. But the storm won, and GM went bankrupt. As a result of the restructuring, the automaker now owes the U.S. government only $6.7 billion.

That doesn't mean the rest of the government's investment is lost, because taxpayers own 61 percent of the newly configured GM. That's what the public got out of the bankruptcy. The question now is what that GM stock will be worth, once it starts being publicly traded.

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GM's new CEO, Fritz Henderson, says business is looking OK. September sales were abysmal compared with a year ago, but people still bought GM vehicles. The company captured a fifth of the U.S. market.

"In an absolute sense, we weren't particularly happy, given how weak the industry was," Henderson says. "But our share performance was actually the best we've had this year. And I'd say, so far, October is shaping up OK, too."

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By all accounts, GM was a mess before the bankruptcy. Steven Rattner, who led the U.S. task force on saving Chrysler and GM, described his experience in the current issue of Fortune magazine.

Rattner wrote:

"Everyone knew Detroit's reputation for insular, slow-moving cultures. Even by that low standard, I was shocked by the stunningly poor management that we found."

The top brass, Rattner wrote, were sequestered on the uppermost floor, behind locked and guarded doors with cards for an elevator that would take them directly to their private garage.

If GM's in more solid shape now, the question remains whether taxpayers will get their money back.

John Casesa, a longtime industry analyst with the Casesa Shapiro Group, says the answer is maybe. "GM would have to have a very impressive turnaround, and start to earn a lot of money," Casesa says. He means earnings of up to $10 billion a year.

Recently GM has been losing billions, but Casesa says the company is in a much better financial situation now, after bankruptcy. He expects the car market will bounce back — though he admits the economy may remain weak for some time.

From a historic perspective, the numbers are sobering. If you added up all of GM's stock at its peak value, you'd see the company was worth $57 billion. Taxpayers now own a little over the half the company, which means that if we want all our money back, GM will have to be worth even more than it was in those happier days.

Jeremy Anwyl, CEO of, which analyzes the auto industry, agrees it will be hard for taxpayers to be made whole. But Anwyl says it's hard to know whether bailing out Detroit was a bad idea.

"I'm of two minds, because on the one hand, I'm kind of old school," he says. "I'm not sure if government should be investing in business like this. On other hand, I think the consequences might have been pretty dire. So sometimes you just hold your nose and do the right thing, even though in principle it's probably something we shouldn't have done."

In other words, Anwyl says, doing nothing to help the auto industry might have been worse.

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