• Mar 11, 2010
Without the government bailout of General Motors and Chrysler, the U.S. auto industry would likely have two fewer domestic automakers and hundreds of thousands of high paying jobs would be history. The Detroit News reports that ex auto task force chief Steve Rattner recently told an audience at a bankruptcy conference that the state of Michigan and the city of Detroit would have faced municipal bankruptcy if Chrysler and GM were liquidated.

Instead, Rattner claims the government bailout not only saved untold thousands of jobs and two enormous American car companies, but the price tag for the government is shrinking as time goes on. Initial estimates by the task force showed that the auto bailout would cost U.S. taxpayers $20 billion or $30 billion after GM and Chrysler's initial stock sale, but Ratner claims that the current price tag is $10 billion or less. The estimated loss has gone down due in part to the fact that old GM's assets are worth more than previously estimated and The General is turning around its operations more quickly than originally thought. If GM continues to surprise and delight, the government may even make some money when it goes public with a stock offering this year or next.

Would the city of Detroit and the state of Michigan have gone bankrupt if GM and Chrysler were liquidated? There is no way to be sure, but if the government hadn't stepped in and bailed them out, its inaction would have probably cost taxpayers untold billions of dollars as well.

[Source: The Detroit News | Image: Neilson Barnard/Getty]


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  • 47 Comments
      • 4 Years Ago
      I do believe this saved the state of Michigan, probably not Detroit though. Detroit has only one OEM manufacturing facility left in it I believe. That would be Chrysler's Jefferson assembly plant. There are at least a few suppliers, American Axle is also in the city of Detroit. Most of the OEM production and suppliers are dispursed throughout Southeast Michigan.

      The City of Detroit is bankrupt for all practical purposes already. The State of Michigan on the other hand, would have been devastated by the sudden loss in supplier and OEM business taxes and most likely a huge drop in personal income taxes as well.

      That is a worst case scenerio of course. But if the worst happened, the bailout averted huge PBGC liabilities, Medicaid, Medicare liabilities, unemployment compensation, etc, etc, etc. The bailout literally saved the whole state, not to mention the countless others working at dealerships and suppliers spread throughout the country. I think the country could have absorbed the loss, but did anyone really want to find out just how bad it could have been. I know some of you would have liked to see the end result of a few bankruptcies, and as hard as the bailout is to stomach for some, I think it will be viewed by history as the right choice and a smart move.
      • 4 Years Ago
      I think it is very unlikely that the autoworkers who's jobs were saved would have been able to find positions. Lets assume demand stayed the same and the foreign automakers had bumped up production, would those jobs have been in the US?? The hundreds of thousands of individuals who's jobs are supported by the US auto industry aren't trained to do much else and they would have been a huge weight on the rest of the economy had they been unemployed (even temporarily).

      Many economists realize that a totally unstructured, free market economy with no guidance can not maintain peak productivity forever... If the government can get in and get out of the auto industry quickly with little net loss this will hopefully wake up a few more people
        • 4 Years Ago
        The problem is that in the US there aren't many more manufacturing jobs than making cars. Most factory work has gotten shipped to China or other countries. Hell a lot of auto work has done the same.
        • 4 Years Ago
        It's too damn bad, I certainly wouldn't wish anyone to lose their job personally, but most people switch jobs every few years anyway, well union jobs excluded. Get some marketable skills, it's not like making cars doesn't overlap with tons of other manufacturing industries.
      • 4 Years Ago
      So... it compounded the bankruptcy of the entire country and magnified the national debt even more than before, but the bailout "saved" Michigan?

      What a crock...

      All it did was delay the inevitable and reward stupid behavior, thus perpetuating that behavior and causing even worse issues down the line...

      Nice...
        • 4 Years Ago
        sorry for the double post... the page is freaking out
      • 4 Years Ago
      Let's all buy a Toileta and go run into a tree.
      • 4 Years Ago
      Wo look like some of you guys either don't have of have misplaced your COMMON SENSE. Let's try to picture it this way,

      Company + No money = company folds > people loose jobs > further surrounding business do not have business > as a result they fold > more poeple out of work. It's really not difficult to understand this.

      Re Michigan will never regain jobs comment. Michigan has a talented pool of mechanically- inclined people which will be a great base for bringing technology jobs to the state. In order to know who to figure things out you have to know how there work.

      I recently sent my Ipod to Michigan for repair. If I may, "The Pod Drop," was the business I that repaired it. Excellent service and they are based in Michigan. If you need service I highly recomend them.
      • 4 Years Ago
      Although the City of Detroit can go bankrupt under Chapter 9 of the Bankruptcy Code, a state such as Michigan can't go bankrupt. A state can default of its bonds, and cease to perform necessary services, but it can't go bankrupt.
      • 4 Years Ago
      There is no such thing as a free lunch. The bailouts forced the government to print more money, lowering the value of the dollar. Eventually they will be forced to raise interest rates, and this will once again kill the real estate markets, and home values will plummet. Trust me, we all loose in this game.
        • 4 Years Ago
        Once China stops buying our Bonds interest rates will sky rocket. The sudden jump in the dollar is a result of speculation from Forex traders. They think that interest rates will be going up and this will raise the dollar. Unfortunately if the dollar goes up the prices of everything will go down ( including realestate ). the Majority of Home Owners will be living in a home that is worth way less than they owe on it. Read up on the economy back in 1981, as that is where we are headed.
        • 4 Years Ago
        Funny that the dollar is actually up these days...
        • 4 Years Ago
        The US dollar was in the CRAPPER prior to January 20, 2009. Look at the USD today, it has been on a steady climb.

        The GREAT recession and enormous deficit are both bastard children of the fiscally stupid dealings of GWB. Trade agreements (thanks Bubba Clinton & George Sr.) that enable corporations to flush jobs (8 million) from 2000 to now, would be the other parent.

        I am not against trade agreements, however all parties involved MUST play by the agreed upon rules. Wall St. doesn't want the the government to interviene, because this model works very well for them.

        America can recover form the ineptitude of GWB, but will not survive another assault from an unregulated financial industry.

        ....and yes, saving the auto industry, did save Detroit & the state of Michigan. instead of writing Billions in unemployment checks, the state is actually collecting TAXES.

        Taxes = Revenue
        Unemp. Checks = Expenditure

        To the yahoo who said GM would have been fine, because they would have filed Chapter 11 anyway, you conveniently fail to acknowledge that without the administration's shepherding, GM would still be in bankruptcy, with no end in sight.
      dokemion
      • 4 Years Ago
      You made have heard stories about filing your own bankruptcy papers, but you should consider having a bankruptcy lawyer to protect your interests. The lawyer is going to charge you upwards of two thousand dollars, but they will work for you in a bankruptcy filing. The lawyer sits down with you and enters all your debts with account numbers and addresses of creditors. The lawyer will take all your important information including where you work and what the income is from each job.

      Tag: Bankruptcy Help
      • 4 Years Ago
      Rattner was the point guy for the bailout, what would you expect him to say? it was a dumb idea? If GM and Chrysler went under their brands would have been liquidated, you think no one would have snapped up Chevy, Jeep, Buick, Dodge and Cadillac?
        • 4 Years Ago
        And that "snapping up" would go smoothly, right? I mean the Hummer and Saab sales were done in just a few days, IIRC. And the sale of Pontiac and Saturn, well those went off without a hitch.
        • 4 Years Ago
        That is because those sales where not done in bankruptcy but after when GM was looking to protect IP. If they had been done in bankruptcy a judge would have decided the price, and the deal would have been done much quicker. The Chinese gov vetoed Hummer, and Renault came to their senses and realized it made no sense to compete against themselves.
        • 4 Years Ago
        Also think about the fact that the buyers of SAAB and Hummer (and Saturn) were going to get a grace period of having GM build cars for them before having to set up shop and do thingson their own. IF GM had gone BK, I imagine all the tech and tooling would have been available from day one. This would have shot the price of each brand up quite a bit, and not many companies are flush with cash in this global recession.
      • 4 Years Ago
      Let's all buy a Toileta and go run into a tree.
      • 4 Years Ago
      Where are these people angry at all the money wasted in Iraq? That is a complete farrago of failure that costs way more than any bailout of the US automakers. Buying GM, Chrysler and lots of Americans time seem very worthwhile.
      • 4 Years Ago
      Most of those whining about bailouts and stimulus would be the same ones whining about government inaction when companies and/or municipalities folded and things were worse than they are today. Remember that the credit markets froze and the stock market set records (and not good ones) during the days after the previous administration let Lehman Brothers fail. But I guess we could have just done the same thing repeatedly and hoped for different outcomes. Insanity indeed per Einstein.
        • 4 Years Ago
        > Most of those whining about bailouts and stimulus would be the same
        > ones whining about government inaction when companies and/or
        > municipalities folded and things were worse than they are today.

        Would you mind to provide source for your claims? Thank you.
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