Treasury ups auto bailout loss estimate

Washington -The U.S. Treasury Department boosted its estimate of government losses in the $85 billion auto bailout by $170 million.

In the government's latest report to Congress this month, the Treasury upped its estimate to $23.77 billion, up from $23.6 billion.

Last fall, the government dramatically boosted its forecast of losses on the rescues of General Motors Co., Chrysler Group LLC and their finance units from $14 billion to $23.6 billion.

Much of the increase in losses is due to the sharp decline of GM's stock price over the last six months.

GM closed Monday at $24.23, down 0.6 percent. It's down 35 percent over its 52-week-high of $37.23, but the Detroit automaker has rebounded from a low set last year of $19.05. The government's most recent cost estimate is based on GM's closing price of $21.29 as of Nov. 30.

"The auto industry rescue helped save one million jobs and is still projected to cost dramatically less than many had expected during the crisis," said Matthew Anderson, a Treasury spokesman.

The Treasury, which initially held a 61 percent majority stake in GM, now holds a 26.5 percent share, or 500 million shares in GM. To break even, the government would need to average $53 per share for its remaining stake.

At current prices, the government would lose more than $14 billion on its GM bailout.

The sharp decline in GM's stock price has put the government's sale of its remaining shares on hold.

The government booked a $1.3 billion loss on its $12.5 billion bailout of Chrysler.

As part of its $17.2 billion bailout, the Treasury still holds a 74 percent majority stake in Ally Financial Inc., the Detroit-based auto lender and bank holding company. Ally, formerly known as GMAC, put its IPO on hold indefinitely last year because of market weakness.

The government initially estimated it would lose $44 billion on its auto bailout in 2009, before reducing it to $30 billion in December 2009.

dshepardson@detnews.com

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