Did The GM and Chrysler Bailouts Do America A Huge Favor?

According to a new study by the Center For Automotive Research (CAR), for every $1 spent rescuing General Motors and Chrysler in 2008/09, $8 were saved to the U.S. economy, including by those who would have been adversely affected if they’d been allowed to fail.

As the Treasury Department is preparing to sell off its remaining GM shares, leaving to history the disparaging “Government Motors” moniker, the study by the group in Anne Arbor puts things in an entirely different light.

It remains true that taxpayers will lose $13.7 billion from the bailouts of both Chrysler ($1.9 billion lost) and GM ($11.8 billion lost), but says the study, the damage control prevented more bankruptcies that would have sapped $284 billion in household income for 2009 and 2010. Beyond that, it’s estimated this would have cost the government $105 billion in reduced tax revenues and increased expenditures for services such as unemployment compensation.

Therefore, say Sean McAlinden and Debra Menk, the senior researchers bylined on the report, CAR “is confident that in the years ahead this peacetime intervention in the private sector by the U.S. government will be viewed as one of the most successful interventions in U.S. economic history.”

Meanwhile GM is shedding losses of its own now as it plans to withdraw Chevrolet from Europe by model year 2016 and possibly shutter Holden production in Australia.

As the government lets go of the rest of its GM stock holdings, GM will be freer to operate competitively, including its ability to compensate executives and increase shareholder rewards.

“This sale will almost certainly restart the discussion over the question of the ‘worthiness’ of the government’s ‘investment’ in the new GM or its actual return to the general public,” McAlinden and Menk wrote.

If a discussion may now begin, GM’s CEO Dan Akerson is expected to speak Dec. 16 to the National Press Club, and may comment on the study’s findings.

Chrysler Aspen Hybrid.

Chrysler Aspen Hybrid.

And today, Automotive News quoted GM North America President Mark Reuss who spoke of “tens of thousands of people who now can put food on the table” because GM and Chrysler were not shuttered, and are still on the come-back trail.

“The towns where those plants are. The supply bases. The restaurants again. All of the service businesses operating again. How can you put a number on that?” Reuss said. “I’m not sure it was the same as some other industries that were granted [federal bailout] funds.”

How about you? Do you agree the rescue of Chrysler and General Motors, while not desirable, was ultimately the best thing?

Is the study’s findings a back-handed reprise of the phrase attributed to former U.S. Secretary of Defense Charles Erwin Wilson that “what was good for our country was good for General Motors, and vice versa?”

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