GM, Chrysler bailouts saved 2.6 million jobs

Tue, 10 Dec 2013

The Center for Automotive Research (CAR) has been studying the effects of the General Motors and Chrysler bailouts in 2009. Now that the US Treasury has officially sold off the rest of its stake in GM (and Chrysler has already paid back its loan), CAR has released its study on the effects of the bailout with this concluding note: "CAR is confident that in the years ahead, this peacetime intervention in the private sector by the US government will be seen as one of the most successful in US economic history."

Big words, for sure, but there's plenty of evidence to back up the claim. Bailing out GM alone saved 1.2-million jobs. If both GM and Chrysler hadn't been bailed out, US employment would have been reduced by 2.631-million jobs in 2009 and another 1.519-million jobs in 2010, according to the study. If both automakers were allowed to fail, personal income in the US would have decreased by $173.5 billion in 2009 and $110.9 billion in 2010. Instead, the study found that $284.4 billion of personal income was saved by the bailouts.

The Federal government's budget would have been affected due to higher transfer payments, lower social security receipts and lower personal income taxes paid, according to the study, which would have cost the Fed $64.7 billion in 2009 and $40.6 billion in 2010. That's much more money than what the government spent on GM's bailout ($49.5 billion) and Chrysler's bailout ($12.5 billion). It's also much less than the the US Treasury's loss of about $10 billion on GM's bailout. The US Treasury lost $1.9 billion on Chrysler's bailout.

If the numbers seem high, it's because the auto industry is linked at many levels, and the survival of parts suppliers (and their employees' jobs) largely is dependent on the survival of US automakers. For example, the study found that 51 percent of GM's parts suppliers also sell parts to Ford, 56 percent to Chrysler, 58 percent to Asian automakers and 37 percent to European automakers. A failure of virtually any major US automaker would have severe consequences in the global automotive industry.

By Damon Lowney