Was the Automakers Bailout Worth the Cost?
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Was the Automakers Bailout Worth the Cost?

According to CAR, an Ann Arbor, MI-based nonprofit research organization, government assistance to General Motors and Chrysler enabled orderly bankruptcy proceedings and led to the saving of more than 1.14 million automotive related jobs in 2009.

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If you are all about creating and maintaining jobs in this country, then a recent report by the Center for Automotive Research (CAR) should have you smiling, at least somewhat, in these tough economic times.

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According to CAR, an Ann Arbor, MI-based nonprofit research organization, government assistance to General Motors and Chrysler enabled orderly bankruptcy proceedings and led to the saving of more than 1.14 million automotive related jobs in 2009.

CAR researchers modeled the impact of the $80 billion in U.S. aid to General Motors, Chrysler, GMAC and Chrysler Financial using actual economic performance indicators for 2009 and year-to-date 2010.

In addition to the jobs saved in 2009, 314,400 more jobs were saved in 2010. Further, the report showed that government intervention prevented additional personal income losses totaling $71.9 billion for 2009 and $24.6 billion for 2010. The net impact to the federal government — in terms of changes in transfer payments, social security receipts and personal income taxes — was $21.6 billion in 2009 and $7.0 billion in 2010.

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“To date, $13.4 billion in principal has been repaid on the government’s $80 billion U.S. investment in the automotive industry. This study shows that $28.6 billion in net losses to the U.S. Treasury were averted by the policy to provide federal assistance to General Motors and Chrysler,” said Sean McAlinden, executive vice president of research and chief economist at CAR.

“With this in mind, CAR’s analysis shows the government need only recover $38 billion of the remaining $66.6 billion outstanding investment in this industry to achieve a two-year break-even.”

The government will also recoup some of the $80 billion spent on the bailout, as General Motors Co. launched its public stock offering in late November.

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Currently, the government has about a 60% stake in GM, which it took in exchange for the financial aid.

Whatever your feelings are toward the bailout of GM and Chrysler, many in the industry believe that the financial problems would have been worse had the government not stopped in.

In fact, many experts believe that the failure of one or two of Detroit’s Big Three might have driven many automotive suppliers out of business, putting at risk healthier companies like Ford Motor Co. and the import transplants.

And, since many of these suppliers provide parts to the OEs as well as the aftermarket, even independent repair shops would have felt the brunt of these businesses closing.

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So, more than a year later, what do you think of the automotive bailout? Was it good for the industry, as well as the country, for the government to take this step? Do you think that GM, GMAC and Chrysler will pay back their loans?

Would the closing of GM and Chrysler made it harder on vehicle owners trying to get their vehicles fixed? Would these closings and the  closings of dealerships impacted your business in a positive or negative way?  

Let us know your thoughts. E-mail us at [email protected]

For more on the CAR report, visit the researcher’s website at www.cargroup.org

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