The government bailouts of Chrysler Group LLC and General Motors Co. saved 2.6 million jobs in the U.S. economy and hundreds of billions of dollars in personal income and government transfers, says a study of the unprecedented moves North American politicians made to save key parts of the auto industry in 2009.
“In the years ahead, this peacetime intervention in the private sector by the U.S. government will be seen as one of the most successful in U.S. economic history,” the Center for Automotive Research (CAR Group) said in an analysis of the U.S. government’s contributions to the bailouts.
The Ann Arbor, Mich.-based think tank said a failure of the largest and No. 3 Detroit-based auto makers would have cost the U.S. government $105.3-billion (U.S.) in transfer payments and the loss of personal tax and social insurance revenue. Individuals would have lost $284.4-billion in income.
The U.S. government bailouts were assisted by taxpayer funds from the Canadian and Ontario governments, which contributed $13.7-billion (Canadian) to financing that helped the two auto makers go through a quick Chapter 11 bankruptcy protection in the United States. Both companies have since emerged as profitable competitors in North America.
The Canadian contributions saved tens of thousands of jobs in Ontario, including assembly plant jobs at Chrysler plants in Windsor and Brampton, and GM operations in Oshawa and Ingersoll.
That includes about 20,000 direct jobs at the two auto makers in Canada, which would almost certainly have closed their Canadian operations if the federal and Ontario governments had not participated in the bailout financing.
If those two governments had left the Americans to do the heavy financial lifting on their own, the Canadian plants would have been shut, said Jim Stanford, economist for the Unifor union. As the Canadian Auto Workers during the 2008-2009 crisis, the union gave up holidays, company-paid retiree health care benefits and made other concessions to help the two companies convince the government that the bailouts were worthwhile.
Based on the 10:1 multiplier effect that CAR Group estimates applies to the broader economy from high-paying auto jobs, the bailouts preserved about 200,000 Canadian jobs.
One study of the impact of the bailouts on Canada has found that the $13.7-billion contribution by Canadian taxpayers represented a successful outcome when measured against the $20-billion in economic losses that would have been caused if the governments let the companies collapse.
The federal and Ontario governments have received about $2.1-billion in repayments from Chrysler and the sale of shares they were given in the company in return for the bailout money.
About $4.1-billion of the $10.8-billion lent or given to GM has been recovered in the form of repayments by the auto maker and the sale of shares the governments were given in the company.
The two Canadian governments still hold 110.1 million shares of GM, but have not indicated when they plan to sell those shares, which were worth about $4.5-billion (U.S.) based on the closing price of $40.89 on the New York Stock Exchange Monday.
The CAR Group report said the U.S. government is expected to close about $11.8-billion with a plan to sell its remaining shares by the end of the year.
The report said that if the U.S. government had not stepped in, a collapse of Chrysler and GM would have produced a “Depression-Era economy in much of the upper Midwest.”