A Project of The Annenberg Public Policy Center

Chrysler Paid in Full?

Taxpayer beware: You have to read the fine print to know what the president means when he says Chrysler has paid back "every dime" of loans it received "during my watch." The company got $12.5 billion in bailout funds under the Bush and Obama administrations, but — despite what the president said — isn't expected to pay about $1.3 billion of it.

President Barack Obama visited a Chrysler plant in Toledo, Ohio, on June 3 to discuss the recent announcement that the Chrysler Group LLC repaid $5.1 billion in outstanding loans. That brought the total repayment, as of May 24, to $10.6 billion — about $1.9 billion less than the $12.5 billion the company borrowed under the Troubled Asset Relief Program, or TARP.

In his speech, the president said:

Obama, June 3: And today, I’m proud to announce the government has been completely repaid for the investments we made under my watch by Chrysler because of the outstanding work that you guys did. Because of you. Chrysler has repaid every dime and more of what it owes the American taxpayer from the investment we made during my watch. And by the way, you guys repaid it six years ahead of schedule.

Notice the president — sounding very much like a used-car salesman — used the phrases "during my watch" and "under my watch" when describing the TARP loans as being "completely repaid." That's because Chrysler received $4 billion on Jan. 2, 2009, (18 days before Obama took office) and $8.5 billion on April 30 (when Obama was president), according to this Government Accountability Office report (page 9) on TARP.

The Obama administration claims that its investment in Chrysler has been "completely repaid" because the $10.6 billion repaid is larger than the $8.5 billion loan the company received while Obama was in office. 

To help us understand the math, the White House directed us to a statement made on May 24 by Ron Bloom, who heads the president's Auto Task Force, in an interview with MSNBC's Andrea Mitchell:

Bloom, May 24: Today, Chrysler is reducing their obligation to the US taxpayer by $8 billion. They have previously provided us with $2.6 billion of funds. So that 10.6 stacks up against 8.5 billion that the president invested in Chrysler and $4 billion from the prior administration. So, that's over 100% of all moneys that this administration invested and 85% of the total invested funds by the United States government.

But this is fuzzy math, at best. The fact is that the Obama administration "wrote off" part of the original loan issued under Bush.

When Chrysler filed for bankruptcy on April 30, 2009, the "new Chrysler" that emerged assumed only some of the $4 billion loaned by the Bush administration. In a new report issued last month, the GAO explained that Treasury — under the Obama administration — "wrote off $1.6 billion" of the "original $4 billion loan extended to the old Chrysler."

In its May 24 announcement touting Chrysler's final repayment, Treasury acknowledged that it is "unlikely to fully recover" about $1.9 billion.

Treasury, May 24: Treasury committed a total of $12.5 billion to Chrysler under TARP’s Automotive Industry Financing Program (AIFP). With today’s transaction, Chrysler has returned more than $10.6 billion of that amount to taxpayers through principal repayments, interest, and cancelled commitments. Treasury continues to hold a 6.6 percent common equity stake in Chrysler. As previously stated, however, Treasury is unlikely to fully recover its remaining outstanding investment of $1.9 billion in Chrysler.

Since then, the administration has announced that it will sell its remaining Chrysler shares to Fiat, the Italian automaker that will now own a majority of the U.S. car company. Taxpayers will reap about $560 million from the stock sale, Treasury says. That still leaves taxpayers about $1.3 billion in the hole, and Treasury doesn't expect to ever get it back.

Treasury, June 2: Treasury is unlikely to fully recover the difference of $1.3 billion. Treasury has the right to recover proceeds from the disposition of the liquidation trust associated with the bankruptcy of Old Chrysler, but does not expect a material recovery from those assets.

We take no position on whether the government's investment in Chrysler was good public policy. We leave that for you to decide. But before you do, you should have all the facts. And the facts are that the automaker has not completely repaid the investments made by U.S. taxpayers, and that's the result of a decision by the Obama administration to forgive a significant portion of the original loan made by the previous administration.