GM to Recall at Least 38,000 Cars; $25 Billion Loss on Auto Bailout
On a day in which GM announced it was recalling at least 38,000 of its vehicles due to a crash risk, the Treasury Department said in a new report that it now expects to lose $25 billion on the auto bailout, which is $3.3 billion more than was previously forecast.
According to The Detroit News, the report may actually underestimate the losses and comes on the day in which GM’s stock price fell $.07 to $22.20 a share. At this price, the government, which spent $50 billion of taxpayer monies to bailout GM, would lose another $850 million on its “investment” in GM.
The report notes the government still has 500 million shares of GM and needs to sell those shares at $53 a share for the government to break even on the GM bailout. This seems unlikely, and officials said no sale will take place before the November election.
The government holds another 74 percent state in an auto finance company, which is part of another bailout portfolio in which the government invested $17.2 billion. They have only recovered $5.7 billion to date.
And the recalls are not going to help GM become more profitable.
According to Reuters, over 38,000 Impalas -- including 36,413 police cars in the U.S. and 1,713 more in Canada -- from model years 2008 to 2012 will be recalled, and the recalls should begin on August 21st. Non-police versions will not be impacted.
National Highway Traffic Safety Administration (NHTSA) documents revealed that the cars are being recalled because defects “can lead to loss of control of the car.”
Meanwhile GM’s CEO Dan Akerson said he would take actions to boost the company’s stock price, and this could mean a doubling down on the company’s subprime lending. The Obama administration has crusaded against subprime lenders except when those lenders -- like GM Financial -- can benefit the administration politically.