U.S. Hopes To Recoup GM Outlay In 5 Years

Calculation Relies on Fast Revival for Firm Verging on Bankruptcy

The United States would recover most of its planned $50 billion investment in General Motors within five years, according to a preliminary Treasury Department estimate that foresees the company, now on the brink of bankruptcy, rebounding over that time to become a strapping global competitor.

By putting billions of dollars into the ailing automaker, the Obama administration has placed a huge bet on the effort to revive and streamline the company through the elimination of brands, dealerships and factories. Yesterday, the company's union announced that it had approved a cost-cutting contract and GM neared an agreement to shed its Opel brand.

If the government-monitored corporate reorganization fails and GM sputters again, however, the government investment into the company would be lost.

Some industry analysts are skeptical that an automaker that has struggled for so long could be so quickly reborn. The preliminary estimate, by contrast, reflects optimism that the iconic American manufacturer can flourish after its restructuring.

"I don't know how much we're going to recover," acknowledged an administration official who spoke on condition of anonymity. "I'm not here to tout stock. But we're very excited about this as a company."

After a planned GM bankruptcy, during which the company will seek to shed burdensome debts, the U.S. and Canadian governments will own 72.5 percent of the reorganized automaker. In addition, GM will owe the United States about $8 billion.

The United States could recover most of that investment by 2013, when, sources said, a Treasury projection shows the company would reach an equity value of $75 billion.

The government share, by then slightly diluted, would be worth about $46 billion. The $8 billion debt would have been repaid, and the government would have reaped billions in preferred-stock payments. Sources said the estimates are constantly being refined.

Brian Bethune, chief U.S. financial economist for IHS Global Insight, called the assumptions "extremely optimistic" given the risks in the economy and the challenges facing the company.

"Whenever a company goes through that deep of a restructuring, there are all kinds of risks," Bethune said. "This is not a nip-and-tuck exercise. This is major surgery."

Among the key variables in any such forecast is the number of new cars sold annually in the United States as well as the estimate of GM's share of the market.

During the boom years, the annualized figure for car sales in the United States hovered around 16 million. Recently, it has fallen to between 9 million and 10 million on an annualized basis.