GM, Ally exit plan needed for U.S. Treasury, says government watchdog
House panel grills officials about Delphi pension decisions
Photo credit: Bloomberg
WASHINGTON (Reuters) -- Market conditions have slowed the U.S. Treasury's progress in selling stakes in General Motors Co. and its one-time consumer financing arm, but the Obama administration should develop a solid plan for doing so, a government watchdog told a House panel today.
Members of the House oversight panel also grilled former auto task force chief Ron Bloom, legal adviser Matthew Feldman, and member Harry Wilson on other aspects of GM's 2009 bailout, including the company's decision to "top off" pension plans for Delphi's hourly workers, while not doing the same for salaried retirees.
Christy Romero, special inspector general for the financial-crisis-era corporate bailout initiative known as the Troubled Asset Relief Program, said it could take a number of years for taxpayers to simply break even on the investments in GM and Ally Financial.
She also testified that her office's ability to investigate the task's force role in GM's decision to provide additional funds for hourly workers has encountered "significant delays" due to lack of cooperation from these task force members.
After more than a year of requests, all three task members today agreed to meet with her office, also known as SIGTARP.
Romero noted in testimony for a subcommittee of the Republican-led House Oversight Committee that previous government audits had raised the prospect that Treasury could sell shares below break-even prices.
"Although that would result in taxpayers getting out of these investments more quickly, it would decrease taxpayer return," Romero said. "Treasury should develop a concrete exit plan for GM and Ally."
Treasury, which has invested more than $50 billion in GM, has not sold any shares since 2010. It would need to sell its remaining stake of 500 million shares at more than $52 each to break even on the bailout.
The stock is trading just above $20, down sharply from its initial public offering price of $33 in November 2010.
Previously known as GMAC, Ally filed its intent in March 2011 to seek a public share offering, but has not yet taken that step.
Even if Treasury sells a large amount of its Ally stock in an IPO, it would still take a year or more to dispose of its ownership stake, Romero said, citing a government analysis.
The government injected $17 billion into the lender through multiple bailouts during the recent financial crisis and now owns about 74 percent of the company.
Taxpayers still hold about 30 percent of GM equity, roughly half of their initial interest coming out of the automaker's bankruptcy in 2009.
The House hearing focused mostly on the Delphi pension plans, and why the task force's members hadn't cooperated with SIGTARP's investigation.
The special inspector general is looking at whether the White House and Treasury Department pushed GM to shore up certain ailing union pension plans at GM's former parts unit, Delphi Corp., while non-union employees had to settle for reduced benefits as a result of the supplier's bankruptcy.
Republicans have long complained that the government-sponsored bailout and bankruptcy of GM, Chrysler and suppliers were at least partly aimed at salvaging union jobs in politically crucial and economically hard-hit Michigan and Ohio.
President Barack Obama has campaigned heavily in those states on a signature economic policy achievement -- the revival of U.S. auto manufacturing due to his intervention following its near-collapse soon after he took office.
Organized labor has been a cornerstone Obama constituent and a prime target for Republicans this election season. Some Republicans have accused mainly public-sector unions of sapping municipal budgets with bloated contracts and benefits.
'Top up' payment
Unable to meet its obligations, once-bankrupt Delphi turned over its underfunded pension plans covering some 70,000 workers and retirees in 2009 to government insurers, which would pay out benefits but at rates lower than promised.
The three task force members defended their handling of the bailout, noting that in the case of the Delphi pension plans, it deferred decisions to GM.
Feldman, the task force's former legal adviser, said GM chose to top off the hourly workers' plans to honor its agreement with the UAW. The company didn't have a similar contractual agreement with Delphi's salaried retirees, he added.
The task force only played an adviser role, Feldman said, rejecting the accusations that the UAW or Obama administration pressured Treasury in anyway.
GM agreed to add about $1 billion to accounts for 40 percent of the pension recipients, mainly hourly employees and retirees of the UAW and other smaller unions. The 20,000 non-union salaried employees were excluded, as were some other union workers.
The task force disbanded after GM and Chrysler emerged from bankruptcy with taxpayer capital, scaled-back operations and thousands fewer workers.
In responding to panel questions about why it took them so long to respond to SIGTARP's interview requests, the three task force members gave various reasons, ranging from being busy to having disclosed all the information they had.
Bloom, the former auto czar, said he'd since left public service and was involved in personal matters. He'd also testified repeatedly before other government officials on this matter. He added: "I didn't believe I had anything I could usefully contribute.
Without information from the three, investigators do not have "sufficient facts to determine their role in the Delphi decision or to make a determination as to whether there was any pressure on GM in that decision," Romero said.
GM has said the government never pressured it on business decisions.
Christina Rogers and Reuters contributed to this report.