Panel slams US Treasury's vetting of Chrysler unit
By John Crawley |
January 14, 2011, Friday
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Print Edition
Print Edition
THE United States Treasury may not have fully vetted the settlement of its interest in Chrysler Financial last year and not gotten a strong enough return for taxpayers, a bailout watchdog said in a report yesterday.
The deal most clearly illustrated a broader finding of the bipartisan Congressional Oversight Panel: that the Obama administration may be too enamored of the politically appealing scenario of quickly cutting its stake in the auto business rather than patiently managing taxpayer interests.
"Treasury's efforts have in some cases lacked transparency and accountability," said former Delaware Senator Ted Kaufman, who headed the group's last report on the auto sector.
Kaufman stressed his group understood the administration faced tough decisions in orchestrating their overhaul and bankruptcy. Despite the criticism, the panel said in the report that the government's intervention was ambitious and the companies now "appear to be on a promising course."
However, he said taxpayers will likely lose billions on now-public General Motors, and Treasury may have "left money on the table" in its dealings with private equity firm Cerberus Capital Management over Chrysler Financial, the auto maker's one-time consumer financing arm.
Treasury has recovered about half of the US$50 billion extended to GM in return for nearly 61 percent of the restructured company, and about US$2.2 billion of the US$12 billion given to Chrysler in exchange for a 10 percent interest.
Treasury assumed 40 percent of Chrysler Financial's equity as part of a US$3.5 billion pre-bankruptcy loan in January 2009 to the lending unit's parent, Chrysler Holding, which was owned at the time by Cerberus.
Treasury settled for US$1.9 billion - a loss of US$1.6 billion on the loan - in May 2010, transferring the stake to Cerberus, which became the sole owner.
Cerberus then agreed to sell the financing business for US$6.3 billion to Toronto Dominion Bank in December, raising eyebrows over Treasury's handling of the settlement.
The panel found that Treasury officials apparently conducted "limited valuation due diligence, focusing on the merits of the offer from Cerberus," the report said.
The deal most clearly illustrated a broader finding of the bipartisan Congressional Oversight Panel: that the Obama administration may be too enamored of the politically appealing scenario of quickly cutting its stake in the auto business rather than patiently managing taxpayer interests.
"Treasury's efforts have in some cases lacked transparency and accountability," said former Delaware Senator Ted Kaufman, who headed the group's last report on the auto sector.
Kaufman stressed his group understood the administration faced tough decisions in orchestrating their overhaul and bankruptcy. Despite the criticism, the panel said in the report that the government's intervention was ambitious and the companies now "appear to be on a promising course."
However, he said taxpayers will likely lose billions on now-public General Motors, and Treasury may have "left money on the table" in its dealings with private equity firm Cerberus Capital Management over Chrysler Financial, the auto maker's one-time consumer financing arm.
Treasury has recovered about half of the US$50 billion extended to GM in return for nearly 61 percent of the restructured company, and about US$2.2 billion of the US$12 billion given to Chrysler in exchange for a 10 percent interest.
Treasury assumed 40 percent of Chrysler Financial's equity as part of a US$3.5 billion pre-bankruptcy loan in January 2009 to the lending unit's parent, Chrysler Holding, which was owned at the time by Cerberus.
Treasury settled for US$1.9 billion - a loss of US$1.6 billion on the loan - in May 2010, transferring the stake to Cerberus, which became the sole owner.
Cerberus then agreed to sell the financing business for US$6.3 billion to Toronto Dominion Bank in December, raising eyebrows over Treasury's handling of the settlement.
The panel found that Treasury officials apparently conducted "limited valuation due diligence, focusing on the merits of the offer from Cerberus," the report said.
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