Has the auto industry bailout succeeded?

Posted by scapozzola on 05/16/2011

AOL Auto Editor David Kiley has published an opinion piece explaining why the federally funded auto industry bailout was a success.  Kiley says it shouldn't take much to defend the wisdom of "not letting GM and Chrysler, representing more than a quarter of the U.S. auto industry, collapse into liquidation, which would have created chaos and vast unemployment in the most important manufacturing industry remaining in the U.S."

Kiley says critics of the bailout advocate that "free markets determine the fate of private companies."  While this is understandable, he believes that a compelling economic national interest more than counterbalanced any such hesitation:

Both automakers are here today, building cars, mostly in the Midwest, and re-hiring thousands of workers, because the U.S. government kept both companies, in the midst of the meltdown of financial markets in 2008 and early 2009, from being chopped up piecemeal. The rescue of the two automakers also kept hundreds of auto parts companies from going bust. The U.S. auto industry is still the spine of the economies of Michigan, Ohio, Indiana, as well as being important to other states including Pennsylvania, Illinois and Kentucky.

In all, the Center for Automotive Research (CAR) in Ann Arbor, Mich., reckons the government's bailouts of the U.S. auto industry spared more than 1.14 million jobs in 2009, and prevented "additional personal income losses" of nearly $97 billion in 2009 and 2010. Another 314,400 jobs were saved in 2010. The research organization based its conclusions on the potential impact of auto-industry collapse for jobs at U.S. automakers and suppliers, and ripple effects on the economy at large.

In an analysis in The Politico, reporters Ben Smith and Byron Tau argue that the success of the bailout could provide a campaign issue for President Obama:

Both automakers are here today, building cars, mostly in the Midwest, and re-hiring thousands of workers, because the U.S. government kept both companies, in the midst of the meltdown of financial markets in 2008 and early 2009, from being chopped up piecemeal. The rescue of the two automakers also kept hundreds of auto parts companies from going bust. The U.S. auto industry is still the spine of the economies of Michigan, Ohio, Indiana, as well as being important to other states including Pennsylvania, Illinois and Kentucky.

In all, the Center for Automotive Research (CAR) in Ann Arbor, Mich., reckons the government's bailouts of the U.S. auto industry spared more than 1.14 million jobs in 2009, and prevented "additional personal income losses" of nearly $97 billion in 2009 and 2010. Another 314,400 jobs were saved in 2010. The research organization based its conclusions on the potential impact of auto-industry collapse for jobs at U.S. automakers and suppliers, and ripple effects on the economy at large.

Smith and Tau quote Alliance for American Manufacturing Executive Director Scott Paul as suggesting that the results of the bailout may appear mixed to some voters, depending on how their local workforce was affected:

“There’s a lot of localized opinion on this — depending on if the plant is growing and or the plant is shut down,” said Scott Paul, executive director of the Alliance for American Manufacturing, pointing to Spring Hill, Tenn. and Pontiac, Mich. as examples of communities that lost either jobs or clout in the restructuring process.

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1 comment

Anonymous wrote 1 year 40 weeks ago

Various, mulitple airlines

Various, mulitple airlines went through restucturing. They continued to fly with passengers, have mechanics etc. But they did not get Billions from the American people. They had to make hard choices. Salaries, pensions etc. had to change. They had to change the way they did business from the CEO's on down. Nothing changed for the 2 car manufactures. They went back to business as usual, pensions, CEO'S, salaries etc. If a business/company allows its top dogs (CEO's, and others) to run the company foolishly then why should we the people pay their way? If it were a small company doing that the gov would not bail them out they would just restructure or go under. What right did the gov have removing the head honcho and putting someone else? Did you know that nobody that was NOT union did NOT get their job back? Fair? Not at all.

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