"Less than two years ago, we made a commitment to repay the U.S. . . .taxpayers in full, and today we made good on that promise."
Sergio Marchionne on Tuesday, May 24th, 2011 in a press release
CEO says Chrysler Group is now square with the American taxpayer
In an announcement reminiscent of one made by GM around this time last year, Chrysler Group LLC boasted this week that it had paid back money lent to it by the American government, with interest, six years ahead of schedule.
President Barack Obama, who is expected to highlight the milestone in a visit to a Toledo, Ohio, Chrysler plant on June 3, called the repayment "a significant milestone for the turnaround of Chrysler and the countless communities and families who rely on the American auto industry." He and other Democrats adopted an I-told-you-so stance, with some Democrats taking the opportunity to remind the public that many Republicans opposed the auto bailouts.
In a press release from Chrysler Group LLC announcing the loan repayment, the company's Chief Executive Officer Sergio Marchionne stated, "Less than two years ago, we made a commitment to repay the U.S. and Canadian taxpayers in full, and today we made good on that promise."
For this item, we're going to focus on whether the company repaid U.S. taxpayers.
Chrysler Group LLC repaid $5.1 billion in Troubled Asset Relief Program (TARP) loans and formally terminated its ability to draw from a remaining $2.1 billion line of credit extended through TARP. Together with interest and fees, Chrysler Group has now paid $6.5 billion to the U.S. Treasury. It borrowed $5.1 billion from the U.S. government when it began operations under new ownership in June 2009. In addition, the U.S. Treasury still holds a 6.6 percent common equity stake in Chrysler Group.
So is Chrysler now really square with the American taxpayer?
The press release doesn't mention it, but there's more to the government's investment in Chrysler than the loans to Chrysler Group LLC.
In its own press release about Chrysler's loan repayment, the U.S. Department of Treasury lays out a more complete picture of taxpayer support of Chrysler:
"Treasury committed a total of $12.5 billion to Chrysler under TARP’s Automotive Industry Financing Program (AIFP)," the release states. "With today’s transaction, Chrysler has returned more than $10.6 billion of that amount to taxpayers through principal repayments, interest, and cancelled commitments. Treasury continues to hold a 6.6 percent common equity stake in Chrysler. As previously stated, however, Treasury is unlikely to fully recover its remaining outstanding investment of $1.9 billion in Chrysler."
In an interview with MSNBC's Andrea Mitchell on May 24, 2011, Ron Bloom, assistant to President Obama in charge of manufacturing policy, broke it down more plainly:
"Today, Chrysler is reducing their obligation to the U.S. taxpayer by $8 billion. They have previously provided us with $2.6 billion of funds. So, that $10.6 (billion) stacks up against $8.5 billion that the president invested in Chrysler and $4 billion from the prior administration. So, that's over 100 percent of all monies that this administration invested and about 85 percent of the total invested funds by the United States government."
So how can the Chrysler Group LLC claim to have squared its obligation to the American taxpayers when only 85 percent of the taxpayers' investment in Chrysler has been recouped?
Notice how we keep writing Chrysler Group LLC. There's a reason for that. That's the "new" Chrysler company that emerged from bankruptcy in 2009.
We'll let Gualberto Ranieri, head of communications for the Chrysler Group LLC, explain.
Ranieri likened the generic use of the word "Chrysler" to a fruit salad, which is made up of lots of different fruits: apples, strawberries, blueberries...you get the idea. When you talk about Chrysler, there's not just one company. There's the "old Chrysler," the company that was liquidated in bankruptcy. There's the "new" Chrysler, aka Chrysler Group LLC, the newly formed company that purchased most of the assets of Old Chrysler in a bankruptcy sale. There's also the financing firms Chrysler Financial and GMAC.
"We are not responsible for the old Chrysler," Ranieri said. "We are not responsible for Chrysler Financial. I am not responsible for my brother's loans, even though we have the same last name."
Chrysler Group CEO Marchionne can only speak for the new company, Ranieri said, and the government money extended to Chrysler Group has been fully repaid, with interest.
That's technically true, Edward Niedermeyer, editor-in-chief of The Truth About Cars website wrote this week. "It does, however, fail to account (again) for the $1.9 billion Debtor-in-Possession 'loan' which financed Chrysler during bankruptcy and was conveniently left to die with the remains of 'Old Chrysler.' Nor does it account for the $1.5 billion loaned to Chrysler’s suppliers to keep them afloat amidst the bailout chaos."
Chrysler and its "political bedfellows" should be "forgiven for a little cheering," Niedermeyer wrote. The loan repayment is a positive sign of hope for a once seemingly doomed company.
"It’s just that taxpayers still deserve a full and transparent accounting of 'every penny' (to borrow a phrase) that actually went into Chrysler, not just 'loans made in the last two years' or 'loans made by the Obama Administration' or other weasel-wordings employed to make the bailout seem more successful than it is," Niedermeyer wrote. "Though bailout supporters will doubtless argue that 'it doesn’t matter' because Chrysler is alive today and 'that’s what matters,' this doesn’t justify a lack of transparency. In fact, if the bailout was successful because GM and Chrysler survived, that’s all the more reason to not fear the truth about what the bailout actually cost."
James Gattuso, a senior research fellow in regulatory policy at the conservative Heritage Foundation, said there was nearly $2 billion in taxpayer money that "went down with the ship with the old shell" of Chrysler. Technically, he said, Chrysler Group LLC is a different company. But from a taxpayers' perspective, there's little distinction.
"If the taxpayers were a bank, they wouldn't stay in business very long," he said. "The taxpayers took a loss, or they are still in the red at least."
Now, the U.S. Treasury still owns a 6.6 percent common equity stake in Chrysler Group. That has an undetermined value, as the company has not yet gone public. But as the Treasury itself acknowledged, "Treasury is unlikely to fully recover its remaining outstanding investment of $1.9 billion in Chrysler."
We asked Lawrence J. White, a professor of economics at the Stern School of Business at New York University what he made of Marchionne's statement.
"This certainly appears to be another instance of careful language, where all of Chrysler's statement is focused on loans to Chrysler but not the other Treasury investments," White said. "Yes, this appears to be an incomplete statement."
As we noted earlier, the statements made by Marchionne were similar to those made by General Motors CEO Ed Whitacre last year. But the situations are different. For one, the government took a much larger equity stake in GM. For more details, see our fact-check related to Whitacre's claims last year.
Again, there may be cause for celebratory comments from Chrysler. But Marchionne's statement, while technically accurate, doesn't tell the full story. Yes, Chrysler Group LLC has fully repaid the loans made to it two years ago. But that's not the full measure of the American taxpayers' investments to try to save Chrysler, including $2 billion to "old" Chrysler that was wiped out in bankruptcy. We doubt taxpayers care much about the distinctions in corporate titles. The government has now gotten most of its money back, but not all of it. Not yet anyway. We rate the claim Half True.
UPDATE: The original version of this article mentioned Canadian taxpayers in the quotation. But since we are focusing on U.S, contributions, the reference to Canada was removed from the statement.
Published: Thursday, May 26th, 2011 at 1:20 p.m.
Chrysler website, Press release: "Chrysler Group LLC Completes Refinancing and Repays U.S. and Canadian Government Loans in Full," May 24, 2011
PolitiFact, "CEO says GM has repaid government loans in full," by Robert Farley, April 27, 2010
White House website, Statement by President Obama on Chrysler’s Repayment, May 24, 2011
U.S. Department of Treasury, Press release: "Chrysler Repays Outstanding TARP Loans," May 24, 2011
Reuters, "Chrysler repays $7.6 billion U.S., Canada loans," by Ben Klayman, May 24, 2011
Government Accountability Office, Financial Audit: Office of Financial Stability (Troubled Asset Relief Program) Fiscal Years 2010 and 2009 Financial Statements, November, 2010
House Judiciary Committee, Statement by Ron Bloom, Senior Advisor, at the U.S. Treasury Department Before the House Judiciary Commercial and Administrative Law Subcommittee: "Ramifications of Auto Industry Bankruptcies, Part II," July 21, 2009
Office of the Special Inspector General for the Troubled Asset Relief Program, Quarterly Report to Congress, April 20, 2010
Congressional Budget Office, Report on the Troubled Asset Relief Program, March 2010
The Truth About Cars, "Chrysler Celebrates 'Payback,' Acknowledges Outstanding Obligations (Sort Of)," by Edward Niedermeyer, May 24, 2011
CQ Transcripts, MSNBC interview of Ron Bloom, assistant to the president in charge of manufacturing policy, May 24, 2011
Interview with Gualberto Ranieri, head of communications for the Chrysler Group LLC, May 25, 2011
Interview with James Gattuso, a senior research fellow in regulatory policy at the Heritage Foundation, May 24, 2011
E-mail interview with Lawrence J. White, a professor of economics at the Stern School of Business at New York University, May 24, 2011
E-mail interview with Nick Loris, policy analyst at the Heritage Foundation, May 24, 2011
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