United States of Autos

The WSJ reports:

The Treasury Department is poised to inject more than $7 billion into GMAC LLC, the first installment of a new government aid package that could reach $14 billion, according to people familiar with the matter.

As a result of the move, the government within months could end up owning both GMAC and General Motors Corp. The GM plan being devised by President Barack Obama's auto task force calls for the government to emerge with a majority stake. And the increasing infusion of taxpayer money into GMAC could turn the U.S. government into a majority shareholder there.

The GMAC injection is designed to firm up the auto-financing company's battered balance sheet and allow it to continue making loans for car purchases at GM and Chrysler LLC. The Treasury already put $5 billion into GMAC in December.

The GMAC funding is an illustration of how rapidly the government effort to rescue the U.S. auto industry is escalating in cost and scope. What began as an emergency batch of loans to GM, Chrysler and GMAC in December -- totaling just over $20 billion -- now looks likely to balloon well beyond $50 billion and could approach $100 billion by the end of the year.

Rapidly? That implies the $20B, which was ramped up to $25B by the time I wrote the post Ener-GM Bail last August, was small in size. I put the initial $25B loan subsidy at:

25 * 129.4M = $3.23B / year if the loans are paid back in full

The if because I doubted the autos could even pay back those subsidized loans after their massive sales drop from 2007 to 2008 (though that fall now looks like a drop in a pond compared to the recent collapse).



Heck (haven't used the word heck in a while) by only September of last year it was VERY apparent the $25B wasn't enough (see When $25 Billion is Chump Change).

Does anyone think that the additional $7.5 Billion will be all they need?

Source: Autoblog