Although I'm pretty sure every major automaker is also a financial company, and has been for quite a while. All those special 0% down or cash back deals don't come from the dealer.
The US Treasury made a ~ $2.4 billion profit on a $17.2 billion investment: https://www.treasury.gov/press-center/press-releases/Pages/j...
My real objection is to thinking of automakers as not having finance as core to their business. The vast majority of new car purchases are financed in some manner[1], and many of those are through the financial divisions of the automakers[2]. To my eyes, finance incentives are core to their marketing, and marketing is core to their business.
1: http://www.consumerreports.org/cro/news/2013/09/car-financin...
2: http://www.reuters.com/article/us-autos-financing-insight-id...
http://www.wolframalpha.com/input/?i=compound+interest&a=*C....
Assumptions:
- I know the amount was not dispersed all at once at the start
- I have no idea what compounding frequency seems appropriate
- Does not account for inflation
- Time frame: 12/29/2008–10/17/2014 per the linked pdf [1]
Aside: $17.2B 2008 dollars adjusted for inflation becomes $18.89B 2014 dollars.
https://www.wolframalpha.com/input/?i=17%2C200%2C000%2C000+2...
That makes the return a bit less exciting.
I'd love to model this in a more accurate way if others know how that might be done.
1: https://www.treasury.gov/press-center/press-releases/Documen...
Factor in the interest USA would have saved by paying down the national debt instead. Additionally, consider what private investors would have returned with the same investment and what they would have paid in tax on personal income if they had never been taxed that $17.2b instead.
They won on this one, we can point at the various Solyndras the USA has bet on and lost while we are at it. This ignores the fact that we don't mail taxes in for government to act like a massive VC. We send the cash in so they can fix the 'crumbling roads and bridges', service debt and help the poor we are always hearing about.
The average interest rate on the debt is 2.43$, we have around $17 trillion debt, and you're talking about a $17 billion paydown (0.1%).
The amount of interest saved would be around $400 million per year. The profit on the GM bailout was $2400 million, so it would have taken 6 years for the decreased interest to total 2.4 billion.
>we can point at the various Solyndras the USA has bet on and lost while we are at it.
Can you point to the value of the hundreds or thousands of engineers and employees of failed new energy startups that received invaluable real world training and experience who are lending those talents to other companies.
Think about NASA and the 18 billion we "piss away" down that black hole every year, and the huge benefits that we derive from their work and the experience that those who work there gain.
Not every investment the government makes has a return in next-year-dollars.
OTJ Experience: I think it's less speculative and lines less wealthy billionaires pockets to invest directly into education and industry beyond private market money to provide great learning experiences for people.
Until you realize the negative feedback loop of hundreds of thousands of GM employees hitting unemployment lines, and the secondary and tertiary companies that supply and contract for GM also shutting down. 200,000 employees * 1,000/mo unemployment * 100 weeks = $20 billion dollars. Obviously a terrible case, but not even a worst case as I examine only GM employees and not the subsequent losses in direct suppliers/contractors and community losses relying on those employees patronage.
Sure, the investment may not have great returns.
But are you calculating the billions in reduced welfare, or the billions in increased GDP, or the effect of stopping a negative feedback loop which spirals more deeply?
I mean, a GM level destruction isn't just GM. Isn't just suppliers. It's grocery stores. It's car mechanics. It's big box stores. It's fast food. It's everything in those communities that former employees patronized.
When you examine the decision more deeply than "net dollar returned" I think you'll develop a greater appreciation for the economic benefits of entire communities not being ruined.
Now you see why I'm not excited and jumping for joy when people spin it as a profitable investment. It never was a money making endeavor, if it turned out to be, it was by happenstance.
The US government has always invested in it's industries, either through broadly applicable programs like the patent office, or through more targeted items like specialized laws and grants for specific industries. Cash investment isn't really all that different, except they might actually expect some sort of monetary return on that investment, unlike grants.