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]