U.S. taxpayers are still owed $132.9 billion from TARP. (Photo Credit: CC BY/Infrogmation/Fotopedia)

U.S. taxpayers are still owed $132.9 billion by companies that haven’t repaid their Troubled Asset Relief Program debt, reports the Detroit Free Press. Some of it will never be recovered from the automakers that were deemed “too big to fail.”

Years of auto bailout blues

Launched at the zenith of the financial crisis in September 2008, the automotive bailout will reportedly continue on for years, according to Christy Romero, the acting inspector general for the $700 billion bailout. Home mortgage bailout programs – the deepest of the bunch within TARP – will last as late as 2017, costing the U.S. government $51 billion or so more.

Stock market prices have made it difficult for the U.S. Treasury to sell off stake in its 458 bailed-out organizations. Chief among them are AIG, General Motors and Ally Financial. To sell stock in these at or above the break even price – currently $53.98 per share for GM – it will take “a long time” for the rebound to complete, notes the TARP report. Market volatility and struggling banks have stretched the time line interminably.

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‘TARP is not over’

Of the $413.4 billion that has actually been paid out for TARP, the U.S. government has recovered about $318 billion.

“TARP is not over,” Romero said.

Matt Anderson, a spokesman for the U.S. Treasury, noted that substantial progress has been made, however. More than 77 percent of disbursed funds have been recovered.

“We’ll continue to balance the important goals of exiting our investments as soon as practicable and maximizing value for taxpayers,” Anderson said.

Chrysler and lending arm investments unwound

The U.S. government’s investment in Chrysler Group and Chrysler Financial have been resolved, according to the Free Press. In addition, the Treasury has sold its last batch of securities under the $368 million Small Business Administration loan program, an aspect of the TARP agreement.

Sources

Detroit Free Press

Fox News

Huffington Post

Former President George W. Bush defends his auto bailout decision in his new memoir, “Decision Points.” (Photo Credit: Public Domain/Susan Sterner/The White House)

In the new memoir “Decision Points,” former U.S. President George W. Bush stands behind his decision toward the tail end of his presidency to extend a $17.4 billion auto bailout. Automotive News reports that President Bush knew just four days after GM announced it was near bankruptcy – on Nov. 11, 2008 – that he would have to bail out both Chrysler and General Motors. Mr. Bush says he made the “too big to fail” decision earlier that most people realize, and that he told then President-elect Barack Obama of his decision before even the president’s advisers knew.

The ‘Decision Points’ in saving America from collapse

President Bush writes in “Decision Points” that saving American workers and families from economic collapse were important factors in his auto bailout decision. He also claims he considered what he’d be passing on to the Obama administration. The auto bailout package that was put into effect was actually less than what Bush favored, writes Automotive News. He’d wanted a $25 billion plan, but Senate Republicans balked at the price. In order to make the $17.4 billion version to work, President Bush diverted money from TARP that had been intended for Wall Street.

Poor industry management forced the president’s hand

In the automotive chapter of “Decision Points,” Mr. Bush bemoans “decades of poor management” on behalf of the automotive industry. This mismanagement “saddled automakers with enormous health-care and pension costs.” Couple that with a general unresponsiveness to changes in the global automotive industry and American automakers found themselves on the outside looking in as foreign manufacturers captured greater market share.

GM wanted a bailout first, but Bush said no

Then General Motors CEO Rick Wagoner approached President Bush about obtaining bailout money, but Bush said no at first. It was only later that George Bush reversed his stance. He says in “Decision Points” that his path of action became clear when he began to understand just what automaker bankruptcies would do to the American economy.

“My economic advisers had warned that the immediate bankruptcy of the Big Three could cost more than a million jobs, decrease tax revenues by $150 billion and set back American’s GDP by hundreds of billions of dollars,” the former president writes in his memoir.

Even with a bankruptcy, auto loans may be within reach

Sources:

Automotive News

The “Decision Points” to auto bailout woes

Classic automotive advertising introduced consumers to a lifestyle filled with quality, dependability and elegance. (Photo Credit: CC BY-SA/Pamla J. Eisenberg/Flickr)

The road to recovery for automakers will not be easy. That’s what General Motors Vice President of Marketing Joel Ewanick recently told Automotive News in an interview. GM has waded through bankruptcy and tremendous turnover, which might seem to make any deals designed simply to move product fast attractive. However, Ewanick insists that GM must focus on brand strength and win back customers with quality rather than with discounts.

Brand strength muscles are there to be flexed

Focus on design and quality is slowly beginning to re-emerge out of the dust of the auto bailout, says Ewanick. For instance, brands such as Cadillac have had a unique sense of style for years, and customers appreciate this. Automakers must embrace the discipline necessary to rebuild faceless automotive brands that were buried under the fire sale mentality. Brands need room and dedication from corporate in order to grow on the public, as “people buy brands, not products,” said Ewanick. Chevrolet previously used Americana in its advertising, and while that company may not continue in the same vein, Ewanick believes that Chevy gets it – a brand has to have soul that goes far beyond the numbers.

Not the death of factory incentives

Factory and dealer incentives are far from dead, Ewanick says. Such deals should simply play a subordinate role to the brand story. Style, quality, efficiency, dependability and all the other hallmarks of a well-marketed automotive brand should drive sales, while discounts will still be there as a garnish. Focusing on brand strength will require that automakers rekindle a dialogue with consumers. In the past, automotive marketing dealt from a position of strength, using stories to create a bond with consumers. Many of the same elements of classic brands like Chevrolet’s Corvette SS and Stingray are waiting to be introduced to younger generations of car buyers. Past mystique shouldn’t be buried, as it isn’t dead.

Work to understand customers, rather than pitching cheap discounts

Everyone enjoys a good sale, but constantly rolling out the shiny banner doesn’t build strong relationships with customers. The auto bailout – where those teetering companies that were “too big to fail” fed upon taxpayer dollars for sustenance – damaged the reputations of automakers nationwide. Fleeting customers will buy when the price is too low to ignore, but this method fails to capture the lifetime buyers upon which America’s automotive industry used to depend. Knowing what consumers want in a car should be the focus of each and every automaker, not just a select few.

Car Deal Expert continues to pitch you the best deals

Sources:

Automotive News

LinkedIn profile of Joel Ewanick

Even dealers suffer from a mysterious lack of marketing

You can kiss your credibility goodbye any time now, GMAC

In the recently released “January Oversight Report: Exiting TARP and Unwinding its Impact on the Financial Markets,” the Congressional Oversight Panel looked over the entire $700 billion TARP bailout. Among many topics across our nation’s economy, they paid particular interest to charges that GMAC received “special treatment” from the Treasury when they were labeled “too big to fail.”

Boosting market confidence

But at what cost? Yes, the Treasury has said that it would be counterproductive to support GM and Chrysler but not also support their financing arm in GMAC. Auto loans have to flow and credit must remain liquid for a full economic recovery. Yes, there is a short-term psychological impact behind the government backing a major player in the U.S. auto market. But these reasons appear ephemeral when one considers that GMAC’s current business plan equates to a bad investment. The panel found that they were still going to lose $5 billion in Q4 2009. Oh, and the Treasury never did publicly say that GMAC was too big to fail.

Soft-balling GMAC doesn’t help the American taxpayer

Apparently, GMAC was subjected to a second round of stress tests (unlike everyone else). This allowed them to “benefit from post-May improvements in its financial position and in related sectors of the economy.” Why GMAC received the extra special treatment – why it was too big to fail while others were not considered such – is still unclear. The Congressional Oversight Panel ultimately calls for the Treasury to come clean on why GMAC got all the extra help in light of their continued floundering performance in the marketplace. Perhaps Mr. Geithner will be more forthcoming this time.

Related Video (Better Days for GMAC):

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