President Barack Obama said on Wednesday that General Motors Co and Chrysler Group were companies worth saving, but he expects both to repay their government loans.
Obama's comments in Raleigh, North Carolina, came as his administration released preliminary figures showing dealers sold more than 16,000 vehicles in the first days of a government-sponsored program aimed at spurring auto sales and lifting U.S. automakers financially.
The impact on GM, Chrysler and Ford Motor Co was not immediately clear with passenger car sales outpacing those of pickups and sport utilities. More specific information was expected to be released next week by the U.S. Transportation Department.
In a speech on the economy, Obama defended the decision for the government to extend GM and Chrysler roughly $64 billion in direct aid and facilitate their bankruptcies this spring.
If GM and Chrysler were willing to do what was necessary to make themselves competitive and if taxpayers were repaid every dime they put on the line, it was a process worth supporting, Obama said in Raleigh, North Carolina.
We saved hundreds of thousands of jobs as a result and expect to get our money back.
Nearly $20 billion of the $50 billion extended to GM was pre-bankruptcy bailout funding that dated to the Bush administration. The balance included loans and other aid granted for court restructuring and exit financing. GM sought Chapter 11 protection in June.
Chrysler received more than $3 billion in bankruptcy financing and roughly $6 billion in loans for operations post- Chapter 11. Chrysler, which is operating in an alliance with Italy's Fiat SpA , received more than $4 billion in bailout financing before seeking court protection in April.
Government stakes in GM and Chrysler include debt-to-equity conversions of initial bailout balances they owed Treasury.
A payoff for that equity is uncertain, but the administration's autos task force says an initial public offering (IPO) for GM could come as soon as 2010 and could include some combination of new shares and the sale of government-held stock.
The U.S. Senate defeated an amendment on Wednesday that would have limited any additional aid to GM and Chrysler under the Treasury Department's corporate bailout initiative, the Troubled Asset Relief Program (TARP).
The Republican-sponsored proposal also would have required Treasury to issue common stock to taxpayers, representing the government's 60 percent stake in GM and 8 percent holdings in Chrysler.
Outside experts question whether the government will recoup its investment.
A Rasmussen Reports national survey released this week found that most respondents opposed the auto bailouts, with only 26 percent saying it was a good idea for the government to take ownership of GM. Eighty percent want the government to sell its stake in GM and Chrysler as soon as possible.
The ability of GM and Chrysler to repay their loans hinges significantly on whether the sagging U.S. auto sales market rebounds and whether they capture a healthy share of the business.
The $1 billion government vehicle trade-in program designed to boost sales and jumpstart GM and Chrysler operations got off to a fast start this week.
Information about sales of specific models under the cash-for-clunkers program was anecdotal. But preliminary government figures showed that passenger cars, which are dominated by Japanese and other foreign manufacturers in the U.S. market, outpaced sales of pickups and sport utilities -- the strength of domestic manufacturers -- by a nearly 2-1 margin.
The clunker program offers rebates to consumers who trade-in gas-guzzlers for more fuel efficient vehicles.
(Reporting by John Crawley in Washington and Kevin Krolicki in Detroit; editing by Andre Grenon)