CAR Claims Auto Bailout Saved The Feds $28.6b

Edward Niedermeyer
by Edward Niedermeyer

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.

Edward Niedermeyer
Edward Niedermeyer

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  • PeriSoft PeriSoft on Nov 18, 2010

    Good lord. What a hopeless task. A whole freaking forum full of people who are only capable of seeing things through the lens of whether a company makes good cars. I think you could gag and tie up most of the commenters here, put them against the wall in a row, and play a tape saying, "THE ISSUE IS NOT GM NOW, BUT THE ECONOMY AS IT WAS DURING THE CREDIT CRUNCH AND HOW IT WOULD HAVE BEEN AFFECTED BY A GM COLLAPSE", for twenty hours straight, and when you ungagged them in the end they'd all say, "GM STILL MAKES BORING CARS!" I guess all the top-end analysts, magazines, corporate (capitalist!) people, etc etc were wrong. Really they should have said, "You know what, gentlemen? The real issue here is not worldwide market confidence or the fact that parts suppliers can't get credit to ride out a major customer collapse - it's whether GM will be making an attractive b-segment diesel wagon in two years! My, how close we came to disaster!" *rolls eyes*

    • See 1 previous
    • Jkross22 Jkross22 on Nov 18, 2010

      Well, it is the truth about cars, and reality is that if GM really was building boring cars in the Toyota idiom, this discussion wouldn't be happening. For too long, GM's cars were anything but. Toyota and Nissan and Honda and others have proven you could build dull cars and make a killing doing so. I'm sorry if other's opinions offends your sensibilities. "I guess all the top-end analysts, magazines, corporate (capitalist!) people, etc etc were wrong. " Yes, that is correct. After all, it was some of these same people that created (and in some cases within GM, continue to perpetuate) the mess.

  • Christy Garwood Christy Garwood on Nov 18, 2010

    Hello everyone, remember I work for GM as a vehicle engineer, and this is my own opinion. Remember Brian Deese? A few of you may want to refresh your memories about his role prior to the GM bankruptcy and the subsequent bailout from the US and Canadian Governments and the UAW VEBA. IIRC, he crunched lots of numbers that he fed to Rattner and Geithner and it was his analysis rather than the CAR that drove the decisions to bailout Cerberus owned Chrysler and GM. @Ed Niedermeyer, your position that GM should commit to paying back, in full, the bailout money is an interesting one. It makes me want to do an opinion poll of our managers and see what they say. In principle I agree that each of us should repay our debts when able. It is my understanding that US bankruptcy courts do not require such renumeration.

    • FiveforFighting FiveforFighting on Nov 18, 2010

      Whether GM was building boring cars is irrelevant. The reason they needed a bailout is that they were building low-quality cars. Their quality history is so bad, in fact, they've lost two generations of customers to imports. That's not going to turn around any time soon.

  • Wolfwagen Is it me or have auto shows just turned to meh? To me, there isn't much excitement anymore. it's like we have hit a second malaise era. Every new vehicle is some cookie-cutter CUV. No cutting-edge designs. No talk of any great powertrains, or technological achievements. It's sort of expected with the push to EVs but there is no news on that front either. No new battery tech, no new charging tech. Nothing.
  • CanadaCraig You can just imagine how quickly the tires are going to wear out on a 5,800 lbs AWD 2024 Dodge Charger.
  • Luke42 I tried FSD for a month in December 2022 on my Model Y and wasn’t impressed.The building-blocks were amazing but sum of the all of those amazing parts was about as useful as Honda Sensing in terms of reducing the driver’s workload.I have a list of fixes I need to see in Autopilot before I blow another $200 renting FSD. But I will try it for free for a month.I would love it if FSD v12 lived up to the hype and my mind were changed. But I have no reason to believe I might be wrong at this point, based on the reviews I’ve read so far. [shrug]. I’m sure I’ll have more to say about it once I get to test it.
  • FormerFF We bought three new and one used car last year, so we won't be visiting any showrooms this year unless a meteor hits one of them. Sorry to hear that Mini has terminated the manual transmission, a Mini could be a fun car to drive with a stick.It appears that 2025 is going to see a significant decrease in the number of models that can be had with a stick. The used car we bought is a Mk 7 GTI with a six speed manual, and my younger daughter and I are enjoying it quite a lot. We'll be hanging on to it for many years.
  • Oberkanone Where is the value here? Magna is assembling the vehicles. The IP is not novel. Just buy the IP at bankruptcy stage for next to nothing.
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