Freep: Auto bailout better deal than expected

The Detroit Free Press has a report on their own independent analysis of the auto bailout, which concludes that the government could end up getting more of its investment back than anticipated. The findings:

A Free Press analysis suggests that taxpayers could get back about $74 billion of the $86 billion the government made available in 2008 and 2009 to save General Motors, Chrysler and Ally Financial, the former GMAC.

So far, the industry has paid the government $18.3 billion in debt, interest and dividends, and the prospects for payback have improved thanks to a rebound in vehicle sales and profits at the three companies. That includes the $1.5 billion Chrysler Financial has paid off and a $5-billion aid plan for suppliers that turned a profit…

“The prospects have modestly exceeded expectations,” said David Sowerby, chief market analyst at Loomis Sayles & Co. “The outcome, due to the health of the patient, has made the doctor look better.”

If the final cost of the bailout is only $12 billion, that would be a real bargain. The cost of doing nothing and allowing GM and Chrysler to collapse and be liquidated would have been much, much higher. The takeover of the retirement systems by the Pension Benefit Guaranty Corporation, which is mandated by law, would have cost more than twice that amount by itself.

Add in the devastating costs to states and local communities due to loss of revenue and increased need for social services and the massive wave of foreclosures it would have kicked off to make the foreclosure crisis even worse and it quickly becomes obvious that saving those companies was not just the best option, it was the only option.