In December of 2008, GM approached Congress and asked for a bridge loan to allow them to restructure. While the House passed legislation to accomplish this, it was not passed through the Senate. Days later, the Bush administration initiated a loan through the TARP program which would provide $14 Billion in loans and stock purchases to GM and follow many of the guidelines that were sought in that legislation. This included a restructure plan that would have to be approved by the Obama administration.

In February of 2009 GM presented their plan to the Obama administration. The plan was seen as preferential to union workers by bondholders and many stated their intention to oppose it. In March of 2009 President Obama announced that he was not accepting the viability plan put forth by GM, but that he was authorizing more funds to keep the company afloat. President Obama also initiated programs to provide funds to companies that supply parts to GM and Chrysler.

GM was placed into bankruptcy on June 1, 2009 and the company was supplied with an additional $30.1 Billion dollars, bringing the total loans and stock purchases to $50 Billion. The company was made a private entity at that time.

The bankruptcy restructuring plan agreed upon by the government and GM gave the US government a 60% share in the company and gave the Canadian government a 12% share. The United Auto Workers gave up a health and savings plan worth $20 Billion in exchange for a 17.5% share in the company and over $8 Billion in debt and preferred stock. Bondholders held $27 Billion in stock prior to the collapse and received only a 10% equity share in the new GM company. 

Throughout the bankruptcy process, President Obama stated that he had not desire to run a car company and would not interfere with daily GM business. This is at odds with numerous actions taken before and after the bankruptcy filings.

  • Days before GM was placed into bankruptcy, the Obama administration demanded and received the resignation of company CEO Rick Wagoner.
  • The Obama administration pushed for the closing of numerous GM dealerships
  • The substance of the bankruptcy settlement was heavily tilted to favor unions - a result that many people suggest would not have occurred without political motivations
  • The bankruptcy settlement allowed the US government, the Canadian, and the UAW Union to appoint chairs of the board - an action that would directly change the direction of the company for years

The TARP program established specific rules on what could be purchased with the funds. These rules stated that only Preferred Stock or Common stock without voting rights could be purchased. The reason for this was to prevent the government from controlling a company it purchased stock in through TARP funds. President Bush violated those rules when he used the money to provide a loan to GM. President Obama further violated those laws when he purchased stock in the company and used the ownership of that stock as authority to appoint board members. The creation of programs to give funds to companies simply because they depended on GM and Chrysler for business was also not allowed in TARP documents.

In April of 2010, the GM CEO announced that the company had repaid all of it's loans from the government in full. The implication was that the government was no longer assisting GM. The reality was that most of the preferred stock purchased by the government had been transferred to common stock to free up capital for GM. This allowed GM to virtually use TARP money from stock purchases to pay off it's initial loans from the Bush administration. After GM repaid the actual loan, the Government still had $44 Billion invested in GM and owned a majority of the company. President Obama used his weekly address to back the statement that GM had paid back it's loans, although he did note that the government still held stock in the company.

In November of 2010, GM was again made public in an Initial Public Offering (IPO) of stock. They sold 365 million shares of GM at roughly $33 dollars a share, paid the government back over $11 billion dollars, and reduced the governments ownership of the company to 33%.

In all, there were 6 programs created to deal with GM and Chrysler. One for each company, one for each company's bank, and one for the auto part suppliers for each company. The charts at the bottom of the page show the amount invested in those 6 programs as a function of time as taken from the TARP disclosure forms. As of March 15, the US government had a total of over $50 Billion invested in those programs. Pie charts also show the maximum invested in each program and the current amount invested in each program.




Emergency Economic Stabilization Act of 2008 (TARP) Bill Summary Bill Text
Auto Industry Financing and Restructuring Act Bill Summary Bill Text



Below is a timeline of events relating to President Obama, the Troubled Asset Relief Program, and General Motors.

  • Dec 2, 2008     - Auto manufacturers ask Bush administration for loan
  • Dec 12, 2008   - House passes the Auto Industry Financing and Restructuring Act (Fails to pass Senate)
  • Dec 20, 2008   - The Bush administration announces loan to GM / Chrysler
  • Dec 29, 2008   - $5 Billion in GMAC assistance
  • Dec 31, 2008   - $14 Billion in loans and stock purchase to GM goes through
  • Feb 17, 2009   - GM presents viability plan
  • Mar 29, 2009   - GM CEO forced to resign by Obama administration
  • Mar 22, 2009   - Ad hoc bondholder letter states that plan not likely to be accepted
  • Mar 30, 2009   - President Obama announces that he does not accept viability plan
  • Apr 8, 2009      - President Obama announces Auto Supplier Support Program
  • Apr 22, 2009    - $2 Billion purchase of stock in GM
  • Apr 30, 2009    - US and Canada accept GM restructuring program
  • May 15, 2009   -  Dealer consolidation program announced
  • May 20, 2009   - $4 Billion purchase of stock in GM 
  • Jun 1, 2009      - GM enters into bankruptcy 
  • Jun 3, 2009      - $33.3 Billion in GM stock purchase (Total investment in GM $51 Billion)
  • Jun 26, 2009    - GM sells Saturn Brand 
  • Jul 10, 2009     - $7 Billion in GMAC Assitance
  • Apr 20, 2010    - GM and Obama Administration announce GM has repaid loans (Current investment $44 Billion)
  • Nov 18, 2010   - GM Initial Public Offering makes it a public company again 


Emergency Economic Stabilization Act of 2008

On October 3, 2008 President Bush signed Emergency Economic Stabilization Act of 2008 into law. Otherwise known as TARP for one of it's subtitles - the Troubled Asset Relief Program. The purpose of the bill was as follows:

  • to immediately provide authority and facilities that the Secretary of the Treasury can use to restore liquidity and stability to the financial system of the United States; and
  • to ensure that such authority and such facilities are used in a manner that--rn
    • protects home values, college funds, retirement accounts, and life savings;
    • preserves homeownership and promotes jobs and economic growth;
    • maximizes overall returns to the taxpayers of the United States; and
    • provides public accountability for the exercise of such authority. 

The legislation laid out guidelines as to what could be purchased, from whom such items could be purchased, how much money could be committed at any given time, and reporting requirements. The legislation created an initial $350 Billion for use by the President, with another $350 Billion available if the President asked for it and Congress authorized it. Within the legislation, the following items are defined.

    • The term `financial institution' means any institution, including, but not limited to, any bank, savings association, credit union, security broker or dealer, or insurance company, established and regulated under the laws of the United States or any State, territory, or possession of the United States, the District of Columbia, Commonwealth of Puerto Rico, Commonwealth of Northern Mariana Islands, Guam, American Samoa, or the United States Virgin Islands, and having significant operations in the United States, but excluding any central bank of, or institution owned by, a foreign government.
  • TROUBLED ASSETS- The term `troubled assets' means-rnrn
    • residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before March 14, 2008, the purchase of which the Secretary determines promotes financial market stability;
    • and any other financial instrument that the Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability, but only upon transmittal of such determination, in writing, to the appropriate committees of Congress.

With those entities defined, Section 113 of the legislation dictates what the Treasury Secretary can purchase with the money by denoting what the Secretary may accept in exchange for that money. The language dictates that either preferred stock must be purchased, or common stock with no voting rights. The reasoning behind these stipulations is that preferred stock is more like debt and is paid prior to common stock. This was thought to minimize risk to the taxpayers. Common stock was allowed to be purchased only if it contained no voting rights in the company (preferred stock has no voting rights). The logic is that if the government owned a large percentage of a bank's stock and possessed voting rights through that stock, then the goverment would essentially control that bank.

  • IN GENERAL- The Secretary may not purchase, or make any commitment to purchase, any troubled asset under the authority of this Act, unless the Secretary receives from the financial institution from which such assets are to be purchased-rn
    • in the case of a financial institution, the securities of which are traded on a national securities exchange, a warrant giving the right to the Secretary to receive nonvoting common stock or preferred stock in such financial institution, or voting stock with respect to which, the Secretary agrees not to exercise voting power, as the Secretary determines appropriate; or
    • in the case of any financial institution other than one described in subparagraph (A), a warrant for common or preferred stock, or a senior debt instrument from such financial institution, as described in paragraph (2)(C).


Automotive Industry Financing Program

The Emergency Economic Stabilization Act of 2008 created the Troubled Asset Relief Program (TARP). TARP was further subdivided into 9 programs.

  • American International Group
  • Automotive Industry Financing Program (AIFP)
  • Capital Purchase Program
  • Consumer and Business Lending Initiative
  • Targeted Investment Program
  • Asset Guarantee Program
  • Capital Assistance Program
  • Community Development Capital Initiative
  • Public-Private Investment Program

Under the AIFP, Treasury made emergency loans to General Motors and Chrysler to provide a path for these companies to go through orderly restructurings and achieve viability. Treasury also made other investments including in Ally Financial (formerly GMAC) and Chrysler Financial. In total, Treasury made available $81 billion through under the program.


Initial GM Plan

On December 2, 2008 GM publicly stated that it was in financial trouble and submitted a plan to Congress which asked for several billion dollars in loans and outlined what the company would do with that money to repay it. Specifically, the plan called for GM to do the following:

  • reduce its dealer network from 6450 to roughly 4700
  • end roughly one-third of its vehicle nameplates (Saturn, etc)
  • reduce wages and benefit costs, including further reductions in executive compensation
  • significantly restructure capital
  • consolidate manufacturing operations

To achieve these goals and return to profitability, GM stated that it would need bridge loans and asked the government to set up an entity to assist in restructuring. Specifically, GM stated that it would need the following:

  • $12 billion to provide adequate liquidity levels through December 31, 2009
  • $4 billion in December 2008
  • A $6 billion line of credit to provide liquidity should a severe market downturn persist
  • GM intended to begin to repay the loans as soon as 2011


Auto Industry Financing and Restructuring Act

In response to GM's request, on December 10, 2008 the US House passed the Auto Industry Financing and Restructuring Act. This legislation was not taken up in the Senate and did not become law. However, it was used as a framework by the Obama administration for some portions of the GM restructuring.

Specifically, the legislation:

  • Created an executive position to oversee the loan
  • Authorized a loan of $14 Billion to be taken from TARP funds for GM and Chrysler
  • Negotiate a restructuring plan within 45 days and withdraw loan if plan is not acceptable
  • Restructuring plan must be submitted by March 31, 2009
  • Prevents dismissing of debt through Chapter 11 bankruptcy


Bush Loan to GM / Chrysler

On December 20, 2008 President Bush announced that due to the failure of Congress to set up a loan program, he would be providing GM / Chysler with a $17.4 Billion dollar loan from the TARP program. The loan was meant to keep the auto companies in business long enough for them to create the restructuring plans which were outlined in the Auto Industry Financing and Restructuring Act, but never enacted into law. This allowed President Obama to make the final decision as to the fates of the companies at the end of March 2009

Under ordinary economic circumstances, I (President Bush speaking) would say this is the price that failed companies must pay, and I would not favor intervening to prevent the auto makers from going out of business. But these are not ordinary circumstances. In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action. 


Because Congress failed to make funds available for this loan, the plan I am announcing today will be drawn from the financial rescue package that Congress approved Congress approved earlier this fall. The terms of the loans would require auto companies to demonstrate how they would become viable. They must pay back all their loans to the government, and show that their firms can obtain a profit and achieve a positive net worth.



GM Plan for Restructuring

On February 17, 2009 GM presented it's plan to restructure and cut 47,000 jobs. Much of the plan was similar to the one it presented Congress in December. The plan noted GM's opposition to filing Chapter 11 bankruptcy stating that the revenue lost from such a procedure would negate the savings from the debt it would no longer have to pay.

  • 36 nameplates or models will be offered in 2012, four less than in GM's December plan
  • cut the number of manufacturing plants from 47 to 33 in 2012, (it forecast 38 in December)
  • Sale Saab to Swedish government
  • Sale or spin off Saturn
  • Cut jobs to 72,000 by 2012 from 92,000 hourly and salaried employees at the end of 2008 (47,000 jobs cut)
  • cut dealerships to 4,700 by 2012 from 6,246 in 2008
  • cut labor costs to the level of foreign competitors with U.S. plants.
  • convert two-thirds of the company's outstanding unsecured public debt to equity
  • $7.7 billion in U.S. Energy Department advanced technology loans
  • sale of AC Delco's independent aftermarkets business and a transmission plant in France
  • GM said it expects to receive about $6 billion in assistance from foreign governments by 2010
  • GM said a bankruptcy filing would present a "considerable" systemic risk to the automotive industry and to the overall economy, just as the Lehman Brothers bankruptcy had a ripple effect last year. The plan considered scenarios for a pre-packaged Chapter 11 filing, and a pre-negotiated cramdown plan, concluding that revenue losses for either one offset the incremental liabilities that would be wiped out by a bankruptcy filing.


Resignation of GM CEO

On March 29, 2009 the CEO of GM resigned. The Obama administration later confirmed that this was at the administration's request. Rick Wagoner had been the CEO of GM for 7 years and with the company for 30 years. The previous day, President Bush was interviewed by Bob Schiefer and noted that the plans put forth by GM were not sufficient and that more was needed.

There's been some serious efforts to deal with a combination of long-standing problems in the auto industry. What we're trying to let them know is that we want to have a successful auto industry, U.S. auto industry. We think we can have a successful U.S. auto industry. But it's got to be one that's realistically designed to weather this storm and to emerge at the other end much more lean, mean and competitive than it currently is.

And that's gonna mean a set of sacrifices from all parties involved — management, labor, shareholders, creditors, suppliers, dealers. Everybody's gonna have to come to the table and say it's important for us to take serious restructuring steps now in order to preserve a brighter future down the road.


Ad Hoc Bondholder Letter

On March 22, 2009 an ad hoc group group of bondholders wrote the leaders of the Auto Task Force and stated that in their opinion the proposal put forth by GM was not fair to bondholders. They also stated that each bondholder would have to be approached separately and accept the terms, and that this was not likely. This was significant in that the rejection of the deal by bondholders meant bankruptcy was likely.

 GM bondholders have been asked to make deeper cuts than other stakeholders: namely, to reduce two-thirds of our instruments’ principal and trade it for speculative securities that may, if the currently planned cost reductions and sales projections prove inaccurate, end up having little or no value.It appears a purely arbitrary decision was made in December as to what bondholders would receive.All other parties involved in the restructuring process will walk away with far more.Many will be paid in full.It is unclear why it was decided that GM’s bondholders should bear the greatest risk here.Consequently, it is not surprising that others may be ready to accept a deal that severely disadvantages bondholders who had no role in crafting it.


Rejection of GM Restructuring Plan

On March 30, 2009 President Obama gave a speech and announced that he was not accepting the plans put forth by the auto industry but was giving the companies more time to come up with a plan to restructure the companies and develop a profitable plan.


Auto Supplier Support Program

On April 8, 2009 the Obama administrator announced the creation of the Supplier Support Program. The program drew money from the Treasury's bailout fund, the Troubled Asset Relief Program and offered financing to help suppliers bridge the gap between delivering parts to car makers and receiving payment. The program was $5 Billion in size, which was less than the $25 billion in assistance the suppliers had sought.

WASHINGTON – The U.S. Department of the Treasury released the following statement today from spokesperson Jenni Engebretsen on the launch by Chrysler LLC and General Motors Corporation of Auto Supplier Support Programs. The programs launched today are open to any receivable created with respect to goods shipped after March 19, 2009 made on qualifying commercial terms. Suppliers interested in participating in the program should contact Chrysler and GM.

"The U.S. Treasury Department is pleased that both GM and Chrysler have moved quickly to launch Supplier Support programs. These efforts, backed by U.S. Treasury resources, will help stabilize the auto supply base and restore credit flows in a critical sector that employs more than 500,000 American workers across the country. During this difficult period of restructuring in the auto industry, the Supplier Support program will provide supply companies with access to liquidity and protect good-paying American jobs while giving GM and Chrysler reliable access to the parts they need."


Approval of Chrysler Restructuring Plans

On April 30, 2009 the White House released a press statement noting that the US and Canada have agreed to the Chrysler restructuring plan. The statement notes that the US will pay $8.08B and receive an 8 percent share in Chrysler while Canada will contribute $2.42B and receive a 2% share. 

Office of the Press Secretary

Joint Statement
President Obama and Prime Minister Harper
United States-Canada Support for Chrysler LLC

The Governments of the United States and Canada have reviewed and approved the restructuring plans of Chrysler LLC and its subsidiaries, including Chrysler Canada Inc.

As a result, thanks to the considerable contributions and sacrifices of company management, the United Auto Workers and Canadian Auto Workers, and major lenders, and a successful partnership agreement with Fiat SpA, our Governments are in a position to extend support to help Chrysler restructure itself and re-emerge as a globally competitive automaker.

"We appreciate the close and cooperative relationship between the U.S. and Canadian governments during this period of restructuring in the auto industry. Together, we have put in place a financing package that will give Chrysler a chance to achieve financial viability," said President Obama.

"I want to thank President Obama and the U.S Automotive Task Force for their close cooperation with Canada on this challenging issue. Thanks to our joint efforts, there is now a road ahead to a stronger Chrysler and a stronger industry in the future on both sides of the border," said Prime Minister Harper.

The Governments will provide $US 10.5 billion in financing, including short term and medium term capital and debtor-in-possession financing to assist with the court-supervised restructuring of Chrysler LLC. Of this amount, the United States is contributing $US 8.08 billion and Canadian governments (including the Government of Canada and Government of Ontario) $US 2.42 billion.

The United States will have 8 percent of the equity of the restructured Chrysler LLC, and Canada and Ontario will have 2 percent, and the United States will appoint four independent directors to the new Chrysler LLC board, while Canada will appoint one independent director.

The close cooperation of our Governments acknowledges that the automotive industries in Canada and the United States are tightly linked, with major automobile manufacturers and suppliers operating on both sides of the border in a completely integrated way. The cost sharing reflects the historic shares of auto production in both countries for Chrysler, which will be maintained under this restructuring agreement.

The United States and Canada are committed to continuing to work together closely as we chart the path to a stronger automobile industry in both countries, both in the short term as we complete similar efforts on General Motors restructuring plan, and in the long term as we seek to ensure a competitive, environmentally responsible automobile industry for the future.


GM Dealer Consolidation

On May 14, 2009 the Treasury Department issued a statement noting the GM consolidation plan. The plan would close 25% of all dealerships.

U.S. Treasury Department
Office of Public Affairs

For Immediate Release Thursday,May 14, 2009

CONTACT: Treasury Public Affairs (202) 622-2960

WASHINGTON - Earlier today, Chrysler announced the specifics of its planned dealer consolidation. This announcement, which has been part of Chrysler’s plan for some time, is one of several steps the Company is taking to restructure to achieve financial viability.

A month ago, Chrysler faced the real prospect of liquidation, which would have eliminated all 3,200 of the company’s dealers. As a result of the successful Chrysler-Fiat partnership and the backing of the President’s Auto Task Force, Chrysler is now positioned to move forward with a plan that retains 75% of its dealers – representing 87% of Chrysler sales. Consistent with the Task Force’s role in the restructuring process, it was not involved in the specific design or implementation of Chrysler’s dealer consolidation plan. The Task Force played no role in deciding which dealers, or how many dealers, were part of Chrysler’s announcement today.

We understand that this rationalization will be difficult on the dealers that will no longer be selling Chrysler cars and on the communities in which they operate. However, the sacrifices by the dealer community – alongside those of auto workers, suppliers, creditors, and other Chrysler stakeholders – are necessary for this company and the industry to succeed. And a stronger Chrysler, supported by an efficient and effective dealer network, will provide more stability for current employees and the prospect for future employment growth.

In addition, the Administration is committed to continuing its significant efforts to help ensure that financing is available to creditworthy dealers and pursuing efforts to help boost domestic demand for cars. These steps will help auto dealers, the auto industry, and the American economy.


GM Enters Bankruptcy

When GM was not able to produce a restructuring plan that the Obama administration would agree to, President Obama decided to allow the company to declare chapter 11 bankruptcy. On June 1, 2009 President Obama spoke about the new GM  and that it's filing for bankruptcy meet requirements established by the administration to obtain government assistance. The full text remarks of the address is available here. Two days later, GM received $30 Billion is stock purchases from the Government.


Fact Sheet on GM Restructuring

In addition to the President's speech on the GM bankruptcy, the White House issued a "fact sheet" on the bankruptcy process and what would happen to GM during the process. The results of the bankruptcy process, as outlined in the fact sheet would be much maligned later as the deal for the UAW workers was thought to have been disproportionally beneficial. The table below shows what each group involved in the company contributed and what each group walked away with after the bankruptcy. The company was also made a private entity again and not offered for trade on the market. 

Entity Holdings Prior to Bankruptcy Holdings After Bankruptcy

The Canadian Government

lend $9.5 billion to GM and New GM

$1.7 billion in debt and preferred stock
12% of the equity of the new GM
the right to select one initial director

The US Government

$30.1 Billion in addition to the $20 Billion already committed

$8.8 billion in debt and preferred stock in the new GM
60% of the equity of the new GM
the right to appoint the initial directors not appointed by UAW and the Canadian government

The United Auto Workers Union

$20 BN Health Benefits Obligation

$2.5 billion trust for health benefits
$6.5 billion in 9% perpetual preferred stock
17.5% of the equity of New GM
warrants to purchase an additional 2.5% of the company
the right to select one independent director

Bond Holders

$27.1 Billion in bonds

10% of the equity of new GM
warrants for an additional 15% of the new Company


Obama Administration Auto Restructuring Initiative
General Motors Restructuring

On March 30, 2009, President Obama laid out a framework for General Motors to achieve viability that required the Company to rework its business plan, accelerate its operational restructuring and make far greater reductions in its outstanding liabilities.After two months of significant management engagement, General Motors has developed such a plan and has already begun to make progress toward its achievement. The Company has also secured commitments of meaningful sacrifice from all of its major stakeholder groups , sacrifices sufficient for this plan to proceed forward. As a result, the President has deemed GM’s plan viable and will be making available about $30 billion of additional federal assistance to support GM’s restructuring plan . To effectuate its plan, General Motors will use Section 363 of the bankruptcy code to clear away the remaining impediments to its successful re-launch.

For the better part of a century, The General Motors Corporation has been one of the most recognizable and largest businesses in the world. Today will rank as another historic day for the company —the end of an old General Motors, and the beginning of a new one.

General Motors Restructuring – Shared Sacrifice

The President made clear throughout this process that every one of the Company’s stakeholder would be expected to sacrifice, and that none would receive special treatment because of the involvement of the government. The resulting agreement is tough but fair , and has garnered broad support from GM’s major stakeholders:

  • Operational restructuring: GM is undertaking a significant operational restructuring that will address past failures, dramatically improve its overall cost structure, and allow the company to move toward profitability even if the auto market recovers slowly. As a result of this restructuring, GM will lower its break even point to a 10 million annual car sales environment. Before the restructuring, GM’s break even point was in excess of 16 million annual car sales.
  • The UAW has made important concessions on compensation and retiree health care that, while difficult, will help save jobs for active employees, pensions and health care for retirees, and make GM more competitive. In virtually every respect, the concessions that the UAW agreed to are more aggressive than what the Bush Administration originally demanded in its loan agreement with GM. Among other things, the UAW’s existing VEBA – to which GM has a $20bn obligation – will be replaced by a new VEBA as described below.
  • The Steering Committee to a portion of GM bondholders has confirmed that bondholders representing at least 54% of GM’s unsecured bonds have agreed to exchange their portion of the Company’s $27.1 billion unsecured debt for their pro-rata share of 10% of the equity of new GM, plus warrants for an additional 15% of the new Company. The Steering Committee confirms that the number of individual and institutional bondholders that support this deal is now over 1,000. The bankruptcy court process will be used to confirm this treatment for those bondholders and other unsecured creditors that failed to accept or did not participate in the offer that was accepted by the aforementioned majority.
  • Painful but necessary restructuring steps will also be implemented. In order to size GM’s footprint to its current share but also allow for volume growth when the economy and the automotive market rebound, GM has planned to reduce its plant operations. Today GM is announcing its intention to close 11 facilities and idle another 3 facilities.

Details on the Creation of New GM:

The newly organized GM will purchase substantially all of the assets of the old GM needed to implement its business plan out of a chapter 11 in exchange for the U.S. Government relinquishing the majority of its loans to GM.

  • This new GM will establish an independent trust (VEBA) that will provide health care benefits for GM’s retirees. The VEBA will be funded by a note of $2.5 billion payable in three installments ending in 2017 and $6.5 billion in 9% perpetual preferred stock. The VEBA will also receive 17.5% of the equity of New GM and warrants to purchase an additional 2.5% of the company. The VEBA will have the right to select one independent director and will have no right to vote its shares or ther governance rights.
  • The GM qualified pension plans for both hourly and salaried employees will be transferred to the New GM as part of the purchase process.
  • The U.S. Treasury is prepared to provide approximately $30.1 billion of financing to support GM through an expedited chapter 11 proceeding and transition the new GM through its restructuring plan. The U.S. Treasury does not anticipate providing any additional assistance to GM beyond this commitment. In exchange for funds already committed by the U.S. Treasury and the new injection of $30.1 billion, the U.S. government will receive approximately $8.8 billion in debt and preferred stock in the new GM and approximately 60% of the equity of the new GM. The U.S. Treasury will also have the right to appoint the initial directors other than those that will be selected by the VEBA and the Canadian government.
  • The Governments of Canada and Ontario will participate alongside the U.S. Treasury by lending $9.5 billion to GM and New GM. The Canadian and Ontario governments will receive approximately $1.7 billion in debt and preferred stock, and approximately 12% of the equity of the new GM. Based on its substantial financial contribution, the Canadian government will also have the right to select one initial director.
  • Based on these steps, the new GM will have far less debt and a world class balance sheet. This will allow the company the financial stability to weather future market downturns and generate significant excess free cash flow to invest in the business.
  • The new GM will also pursue a commitment to build a new small car in an idled UAW factory, which when in place will increase the share of U.S. production for U.S. sale from its current level of about 66% to over 70%.

Principles for Managing Ownership Stake

Consistent with the goal of clearly limiting the government’s role as a reluctant equity owner but careful steward of taxpayer resources, the Obama Administration has established four core principles that will guide the government’s management of ownership interests in private firms. These principles will apply to the U.S. government’s equity stake in GM:

  • The government has no desire to own equity stakes in companies any longer than necessary, and will seek to dispose of its ownership interests as soon as practicable. Our goal is to promote strong and viable companies that can quickly be profitable and contribute to economic growth and jobs without government involvement.
  • In exceptional cases where the U.S. government feels it is necessary to respond to a company’s request for substantial assistance, the government will reserve the right to set upfront conditions to protect taxpayers, promote financial stability and encourage growth. When necessary, these conditions may include restructurings similar to that now underway at GM as well as changes to ensure a strong board of directors that selects management with a sound long-term vision to restore their companies to profitability and to end the need for government support as quickly as is practically feasible.
  • After any up-front conditions are in place, the government will protect the taxpayers’ investment by managing its ownership stake in a hands-off, commercial manner. The government will not interfere with or exert control over day-to-day company operations. No government employees will serve on the boards or be employed by these companies.
  • As a common shareholder, the government will only vote on core governance issues, including the selection of a company’s board of directors and major corporate events or transactions. While protecting taxpayer resources, the government intends to be extremely disciplined as to how it intends to use even these limited rights.


  • GM will continue to honor consumer warranties. This past week, the U.S. Treasury made available the Warranty Support Program to GM and $361 million was funded to a special vehicle available to provide a backstop on the orderly payment of warranties for cars sold during this restructuring period.

The Bankruptcy Process

During this process, GM will continue operating in the ordinary course. From an operating perspective, the day after the filing will not be materially different from the day before the filing. The following parties will be treated as described below:

  • Employees: Employees will get paid in the ordinary course, including salary, wages and ordinary benefits. Assuming the sale moves forward as expected, Pension Plan and VEBA funding will be transferred to New GM.
  • Suppliers: GM will seek authority at its "first day" hearing to continue to pay suppliers in the ordinary course. In addition, the U.S. Treasury’s Supplier Support Program will continue to operate, and GM suppliers benefiting from the program will continue to receive that support.
  • Dealers: GM will seek authority at its "first day" hearing to honor its customer warranties in the ordinary course. Moreover, GM will seek to continue to honor its dealer incentives for those dealers who are expected to continue to be part of GM’s distribution network going forward. There are some dealers that GM has identified that will not continue with GM. It is expected that the terminated dealers will be offered an agreement to orderly wind down their operations over the next 18 months
  • UAW: The modified labor agreement reached between the UAW and GM will be operative and will be assumed by the New GM. 


Repayment of Funds

On April 20, 2010 GM ran a commercial with it's CEO stating that Gm had repaid it's loans in full with interest. The intent of the commercial was to state that GM is no longer using government funds, but is self sufficient. While this statement technically correct in that GM had repaid it's initial loan, the statement discounts the $44 Billion in funds that the US government had invested in GM after this loan repayment was made. The funds to repay the loans were also a direct result of the government stock purchases, meaning that GM had repaid it's government loans with the money that the government used to buy stock in GM.

On April 24, 2010 President Obama used his weekly address to discuss the repayment of GM loans in full with interest and the ending of the ASSP programs. While the President also stated that the loans were being repaid in full, he further noted that the government still help stocks in GM.

GM announced that it paid back it's loans to taxpayers with interest fully five years ahead of schedule. It won't be too long before the stock that the treasury is holding in GM can be sold, helping GM to reimburse the American people for their investment. In addition, Chysler Financial has already fully repaid with interest the loans it received to support auto financing. And we're closing the books on the temporary program that helped parts suppliers weather this storm, returning this investment to the treasury in full with interest.


Initial IPO

On November 18, 2010 GM had an Initial Public Offering (IPO) where is became a publicly traded company again by selling part of the company stocks on the market. The company sold 365 million shares of common stock at a rate of $33 dollars a share. This raised roughly $12 Million in funds which allow reduced the federal government's ownership in the company by half.


TARP Money Supplied to Chrysler and GM

The Automotive Industry Financing Program provided funds to six entities: the car companies GM and Chrysler; their banks GMAC (later Ally) and Chrysler Financial; and the ASSP programs for GM and Chrysler part suppliers. The charts below show the maximum amount allocated to each of the six entities and the amount still owed. The amount owed is based on TARP Disclosure data for March 15, 2011 and the maximum amount for any entity occurred at different times for each entity. In all, the money made available to GM and Chrysler was roughly $81 Billion dollars. As of March 15, 2011 a total of roughly $49 Billion was still invested in GM and Chrysler in the form of either debt or stock. 


The plots below show a timeline of the money received for the three main entities - GM, GMAC, and Chrysler and for all six entities that received money through the program. In the bottom chart, the star represents the time where GM declared that it had repaid it's loans to the government. The amount can also be seen in the top bar chart where the funds in use by GM lowers from $48 Billion to $44 Billion. The drop in amount owed by GM from $44 to $32 indicates the IPO.