NEW YORK (TheStreet) -- Bailing out General Motors
(GM) after the U.S. automaker filed for bankruptcy in 2009 has cost U.S. taxpayers about $11 billion. So, was that money well spent?
What would have happened had the Democrats not controlled the House of Representatives and the government hadn't extended, in stages, $51 billion in Troubled Asset Relief Program monies to the Detroit-based manufacturer?
In those tense days in late-2008 when the country's banks had shut down credit flows, President George W. Bush unilaterally agreed to lend GM $13.4 billion in December of 2009 after the Senate, controlled at that time by the Republicans, killed an emergency Democrat-led bailout bill.
Kentucky Sen. Mitch McConnell, crocodile tears streaming down his cheeks, was quoted in the New York Times that November as saying that "none of us want to see them go down, but very few of us had anything to do with the dilemma that they have created for themselves." McConnell's ire has always appeared to be focused as much on the United Automotive Workers as the automaker.
Five years later, the U.S. government is no longer a shareholder in General Motors, and the once-closeted corporate culture of the automaker has changed so radically as to now be ready to hire a woman to serve as chief executive. The UAW, meanwhile, has been operating as a partner with the Detroit Three in ways that make the union almost indistinguishable from its 1970s incarnation. Just ask Ford (F) CEO Alan Mulally, who credits the companies recent successes to changes at the UAW.
It's important to realize the interconnected nature of the entire domestic auto industry of U.S.-based and foreign-owned manufacturers as well as large and small parts suppliers in addition to dealers. If GM had been allowed to close, and presumably Chrysler along with it, revenue at hundreds if not thousands of auto parts suppliers would have been reduced by 35% or more, forcing many into bankruptcy, according to the CAR study led by Sean McAlinden.
Of the suppliers that sell to General Motors, CAR said 58% sell to Asian vehicle manufacturers such as the Toyota plant in McConnell's Georgetown, Ken. For that reason, Mulally and other auto executive testified in Congress in favor of government loans to GM, Ford's chief rival. Toyota Motor Sales USA President Jim Lentz said his company shared "two thirds of its suppliers with GM."
Had GM and Chrysler been shut down rather than taken through a bankruptcy, reorganized and bailed-out, U.S. employment would have been reduced by 2.6 million jobs in 2009 and 1.5 million jobs in 2010, CAR said. Projecting for GM alone -- that is, not including Chrysler, suppliers and dealers -- the job losses would have totaled 1.2 million in 2009 and 675,000 in 2010.
Apart from the toll on families and local communities, a shutdown of GM and Chrysler would have represented a hard hit to a U.S. economy already teetering on a depression. According to CAR, the net impact to the federal government budget in the form of higher transfer payment, lower social security receipts and lower personal income taxes paid would have totaled $64.7 billion in 2009 and $40.6 billion in 2010.
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