Description: One intriguing chapter in the most current report by Canada’s Auditor General, Michael Ferguson, discussed the AG’s examination of the 2009 government bailouts of Chrysler and General Motors. Ferguson reported as much as $4 billion of the governments’ investment could be lost if the federal and Ontario governments trade in their shares too early. Mr. Ferguson also noted that although there were a number of positives in the way the program was constructed, the fact that Industry Canada did not insist on detailed reporting from the funding recipients means it is extremely difficult to determine what exactly was accomplished by the bailout.
Source: Globe and Mail.com
Date: November 25, 2014
1) The article notes that the governments sold some of their GM and Chrysler shares to pay down public debt. Mr. Ferguson notes that selling the shares early may result in losses on the investments. What strategy would you recommend – selling shares to pay down government debt or holding on to the shares for a longer period in an attempt to achieve higher gains?
2) What is your opinion on the use of taxpayer funds to bail out GM and Chrysler?
3) The article tells us that the government did not ask for detailed reporting from the funding recipients. Place yourself in the role of a senior accountant in the government. What type of reporting might you have asked for from the two automakers?