Summary
Top executives at General Motors and Chrysler have gone out of their way in the past week to say their once-bankrupt companies are positioning themselves to pay back the billions of dollars loaned to them by the federal government. Experts, however, say that billions of dollars are likely to be lost on the automotive bailout.
Analysis
GM is expected to report its third quarter financial results on Monday, giving the first comprehensive look at its balance sheet since it emerged from bankruptcy earlier this year. Regardless of how GM did in Q3, don't expect a speedy payback of government loans.
Executives at GM and Chrysler have both gone out of their way in the past week to say their once-bankrupt companies are positioning themselves to pay back the tens of billions of dollars loaned to them by the federal government.
Others, however, including the special investigator, Neil Barofsky, assigned to act as watchdog for the $700 billion TARP loans, said that while the companies may pay back some of the $65 billion extended to them, the U.S. probably won't ever see full payback. Tens of billions of dollars are expected to be lost on the automotive bailout.
Earlier this month, a candid report from the GAO also threw cold water on the prospects of GM and Chrysler repaying the billions loaned to them.
And in September, a report by the Congressional Oversight Panel expressed skepticism the companies will anytime soon pay back the TARP monies.
GM and Chrysler's ability to repay the loans is predicated on the notion the companies can soon become profitable and structure some kind of plan to obtain public and private funding.
The GAO report says that for GM to repay its indebtedness in full, it would have to achieve a market capitalization nearly 20% greater then the company has ever achieved.
Chrysler would have to build a market capitalization more than 50% greater than the company was appraised to be worth when it merged with Daimler AG in 1998.
