Warrantee Commitment Program Loan
Widely publicized vulnerability of the auto companies in late 2008 and early 2009 raised concerns that consumers may not receive warrantee guarantees on new vehicles from Chrysler and GM. To further restore consumer confidence in the companies and their vehicles, the Treasury announced on March 30, 2009 that a new Warrantee Commitment Program would backstop the two companies' new vehicle warranties. This program applied to any new GM or Chrysler car purchased during the restructuring period.
The Treasury determined that to satisfy all anticipated claims, the warrantee program would have to cover roughy 125 percent of the costs projected by the manufacturer. Of the 125 percent, GM provided 15 percent of the necessary funds for the warrantee program, with the Treasury providing 110 percent.
Amount spent indicates loans and other funds issued as of 7/9/2010 (http://www.ustreas.gov/initiatives/eesa/transactions.shtml). Maximum amount is original loan amount. Deficit impact calculated by CRFB, using CBO's practice of estimating costs on a risk-adjusted present value basis. Deficit impact is derived from CBO's overall subsidy rate for assistance to the automobile industry (60%), as listed in CBO's January 2010 baseline.