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Success of auto bailout remains an uncertainty

Mar 24, 2011 Brian Bradley

In late 2008, the federal government poured $85 billion into the auto industry as part of the Troubled Asset Relief Program. More than two years later, the success of that investment remains an uncertainty, according to a recent report by the Congressional Oversight Panel. The Detroit News reports that sentiment among lawmakers remains mixed because the program failed to lay down concrete objectives for the investment. While the financial injection saved the industry from what many experts agree would have been a massive liquidation, the COP says the lack of additional, clear goals does not make the investment a slam dunk. The COP marked one smaller achievement, in that the expected taxpayer loss of the bailout was reduced from an original estimate of $40 billion to $17 billion. Despite any losses felt by taxpayers, Tim Massad, the Treasury official who oversaw the distribution of TARP funds, said on a conference call that the bailout saved at least 1 million jobs, according to the Detroit News. "I don't think there's any doubt that this was a success," Massad said. "All anyone needs to do is ask autoworkers in Michigan or Ohio. Ask the CEOs." Massad also cited the profitability the United States' largest automakers have achieved over the past year, including General Motors, which recorded a $6.2 billion profit in 2010 - its first annual profit since 2004. Additionally, Chrysler and Ford - the latter of which did not receive a government bailout - attained profits of $6.6 billion in 2010. However, the oversight panel was not so kind about the Treasury department's handling of the financial wing of G.M. The COP stated that the Treasury did not execute proper "ownership rights" of funding of Ally Financial, G.M.'s former financing and credit body. The COP was critical of the Treasury's decision to issue Ally - known then as GMAC - $17.2 billion in funds. The panel also says the Treasury sold Chrysler Financial too early, which it claims resulted in a loss of $600 million. The Detroit News reports that the federal government could still lose up to $9.8 billion in its 33 percent ownership of G.M, which originally cost $49.5 billion.