Alternate Route

Oct 22, 2009 - Fuzzy Math

Here's why you don't want the government's fingers in the day to day business pie.

The government has sunk $50 billion into GM and $14 billion into Chrysler. Rattner has long maintained that the money the Bush administration gave the automakers -- roughly $20 billion for GM and $4 billion for Chrysler -- would have to be written off because it wasn't tied to restructuring.

In exchange for injecting $30 billion into GM as part of its bankruptcy, the government took a 61% equity stake and $8.2 billion in debt. And, Rattner said, based on the market value of GM bonds from pre-bankruptcy that will be converted into shares of the new GM, the 61% stake was worth about $17 billion, giving the government a rough value of $25 billion on its rescue. "We're actually, even now, pretty close to being able to get back the money" spent by the Obama administration, he said.

The promise wasn't that we'd get pretty close. It was that this was an "investment" to save GM and turn us a profit in the end. $25 billion is a long way from $50 billion. And when you're talking in billions of dollars, "pretty close" is pretty meaningless. Even if you want to parse it out to "money spent by the Obama administration", $5 billion is a pretty wide miss. I wonder how many Volts it will take to make up that difference?

Read the full article at freep.com

3:13 am | Categories: automotive news Permalink | Alert Administrator

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