As an automaker and union-funded think tank, the Center For Automotive Research often run afoul of TTAC during the bailout debates of 2008-2009. CAR is to Detroit’s apologists what CAR has long maintained that a failure to bail out GM and Chrysler would have resulted in the total destruction of America’s entire industry, and based on that questionable assumption, it’s latest report [PDF] is claiming that the auto bailout saved the federal government $28.6b over two years. The study is an update of a report CAR issued in May which
produced estimates for two scenarios, as well: a quick, orderly Section 363 bankruptcy (which is what happened), and a drawn-out, disorderly bankruptcy proceeding leading to liquidation of the automakers.
Because those were the choices. A messy, marginally-successful intervention (with demand for GM’s IPO “through the roof”, the firm will still be worth only about what taxpayers put into it) or utter complete annihilation of the industrial Midwest. But if, as CAR takes as gospel, a halfway “normal” restructuring weren’t an option, it was only because the managers of both GM and Chrysler refused to even contemplate the possibility of a bankruptcy filing until it was far too late. And here’s where the long-term impacts get scary: by taking GM and Chrysler under the taxpayer wing, the Government may have saved some money in the short term, but it created a dangerous precedent for the future. Given the events of the auto bailout, why would the leaders of any other failing industry take the difficult path through restructuring when, with the help of think tank apologists, they could simply collapse into a publicly-funded do-over?
But this isn’t about re-fighting the battles of the past, it’s about absolving GM and Chrysler of any obligation to the taxpayers in the future. It’s not a debate over principles, it’s a fight over the bill. CAR’s Chief Economist Sean McAlinden tells Automotive News [sub]
To date, $13.4 billion in principal has been repaid on the government’s $80 billion U.S. investment in the automotive industry. The government need only recover $38 billion of the remaining $66.6 billion outstanding investment in this industry to achieve a two-year breakeven
Which is a bit like saying that you’re not obligated to compensate the owner of a building you knowingly burned down because it was insured. Or like counting every post-bailout dollar that GM spends employing Americans as a cost saved by the government. The fact of the matter is that McAlinden knows that the chances of GM or Chrysler ever being able to fully pay back every penny of their “rescue” are slim, and is resorting to semantics to define their payback point downwards. That this effort relies on a shaky construct of “best case” (what happened) and “worst case” (Armageddon) is proof of its self-serving (rather than truly informative) nature, and McAlinden’s re-writing of GM and Chrysler’s obligations to the taxpayer confirms it. This is not economic analysis, it’s pure PR.
And it’s shoddy PR as well. America’s taxpayers are neither stupid nor disinterested in this matter, and GM’s attempts to pull a fast PR move on the issue of bailout payback have gone nowhere. One has only to look at the negative response to GM’s “Payback” ad for proof. So rather than touting CAR’s suspect and self-serving numbers, GM and Chrysler would be best served by publicly committing to pay back exactly what they received from taxpayers, even if it takes ten years. This is no longer about re-fighting the battles of the bailout era, this is about healing the damaged relationship between the bailed-out automakers and the American people. The success of these two companies (and therefore of the bailout itself), not to mention America’s larger business environment depends on GM and Chrysler making a good-faith effort to make taxpayers whole, not shirking responsibility based on the semantic quibbling of a bought-and-paid-for think tank.