U.S. 'unlikely' to get cash back from automakers: committee

Washington will not get back all the money it has already given to Chrysler LLC and General Motors Corp., the committee responsible for watching the government's subsidy program said Wednesday.

The congressional oversight committee, which monitors the U.S.government's troubled asset relief program (TARP), saidtheDepartment of Treasury and Congressional Budget Office now indicateonly a portion of the cash already extended to Chryslerand GM the two domestic automakers that slipped into and came out of bankruptcy protection in 2009 will be paid back.

"Although taxpayers may recover some portion of their investment in Chrysler and GM, it is unlikely they will recover the entire amount," the committee, which is headed by Harvard professor Elizabeth Warren, said in its September update.

TARP trouble

Starting in late 2008, the government gave money to a wide swath of ailing industries in a bid to limit the damage from the economic recession. The federal government extended approximately $76.6 billion US in special aid to the two automakers, according tothe TARP report. But only aportion of those loans will be recovered, the TARP oversight committee said.

For example,the entire $5.4 billion of the initial subsidy given toChrysler is "highly unlikely to be recovered," the committee update said.

The oversight groupestimated the total amount of TARP cash extended to Chrysler at $14.3 billion.GM received almost $50 billion in aid from Washington.

The U.S. auto sector's troubles are in contrast to other key industriesthat have begunrepaying loans they received from Washington. By the first week in June, for instance, 10 U.S. banks had given backalmost $70 billion to the government in TARP repayments.

Share gains

The oversight committee saidthe car companies' TARPproblems stem partially from the fact that new shares in Chrysler and GM must rise to high levels in order to makelarger repayments feasible.

"In discussions, Treasury agreed withthe panel's assessment that the new companies' stock prices will have to appreciate sharply in order for Treasury, i.e. taxpayers, to be fully repaid on all of the TARP funds that have been invested," the committee's report said.

The committee said such stock appreciation is not feasible.

The U.S. government owns 61 per cent of the revived GM and 10 per cent of the new Chrysler as part of the arrangement to allow the companies to return from creditor protection earlier in 2009.