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Auto bailouts, two years later: new study finds U.S. aid to the auto industry averted loss of more than one million jobs.

Government assistance to General Motors and Chrysler enabled orderly bankruptcy proceedings and led to the saving of more than 1.14 million jobs in 2009 alone, according to a recently released Research Memorandum published by the Center for Automotive Research, (CAR), an Ann Arbor-based nonprofit research organization. The memorandum examines the magnitude of the economic impact of the U.S. policy to provide aid to the auto industry in 2008 and 2009 and weighs the public and private benefits against the public cost.

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CAR researchers modeled the impact of the $80 billion in U.S. aid to General Motors, Chrysler, GMAC and Chrysler Financial using actual economic performance for 2009 and 2010 year-to-date. In addition to the jobs saved in 2009, 314,400 more jobs were saved in 2010. Further, the government intervention prevented additional personal income losses totaling $71.9 billion for 2009 and $24.6 billion for 2010. The net impact to the federal government--in terms of changes in transfer payments, social security receipts and personal income taxes - was $21.6 billion in 2009 and $7.0 billion in 2010.

"To date, $13.4 billion in principal has been repaid on the government's $80 billion U.S. investment in the automotive industry. This study shows that S28.6 billion in net losses to the U.S. Treasury were averted by the policy to provide federal assistance to General Motors and Chrysler," said Sean McAlinden, executive vice president of research and chief economist at CAR. "With this in mind, CAR's analysis shows the government need only recover $38 billion of the remaining $66.6 billion outstanding investment in this industry to achieve a two-year break-even."

The study, which is available at cargroup.org was led by CAR researchers Kristin Dziczek, director of the labor and industry group, and Debra Maranger Menk, project manager.

"The economy performed better than we had originally expected when we produced our May 2009 forecast on the impact of "good" versus "bad" bankruptcies. Although automotive sales were weaker, the Detroit Three market share held up better than anticipated in this smaller market," said Kristin Dziczek. "The federal decision to invest in the auto industry in 2008 and 2009 deployed critical resources to one of the country's most productive industries with the highest economic multipliers of any industry. It was clearly a very successful policy intervention at a critical time."

The Center for Automotive Research's mission is to conduct research on significant issues related to the future direction of the global automotive industry, as well as organize and conduct forums of value to the automotive community. For more information about CAR, visit cargroup.org.

Detroit Regional Chamber President and Chief Executive Officer Sandy K. Baruah served as the administrator of the U.S. Small Business Administration for President George W. Bush.

"The Federal assistance to GM and Chrysler was a bipartisan and economic success. Not only did the program keep these two great American companies from disaster, it kept scores of small- and medium-sized companies associated with the industry alive. The fact that so much of the taxpayers' money has already been repaid has surpassed the expectations I had when the Bush Administration initially proposed the plan in late 2008."
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Title Annotation:FEATURE
Publication:Detroiter
Geographic Code:1U3MI
Date:Jan 1, 2011
Words:536
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