The Ann Arbor, Michigan based Center for Automotive Research (CAR), recently complied a study that illustrated that the orderly, structured bankruptcies of General Motors and Chrysler, conducted with financial assistance from the U.S., Canadian and Ontario governments, helped result in the saving of more than 1 million jobs during 2009.
The study also estimated that a further 314,000 jobs were saved in 2010, while government intervention helped save approximately $96.5 billion in potential personal income losses, while allowing some $28.6 billion to be paid to the feds in the form of social security and personal income taxes.
“To date, $13.4 billion in principal has been repaid on the government’s $80 billion U.S. investment in the automotive industry,” declared Sean McAlinden, chief economist at CAR. “This study shows that $28.6 billion in net losses to the U.S. Treasury were averted by the policy to provide federal assistance to General Motors and Chrysler. 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.”
Overall, most industry analysts agree that the US economy has performed better over the last 18 months than expected and although auto sales were down, the market share of Detroit’s big three held up better than anticipated. Furthermore, based on data compiled from the last couple of months, sales appear to have grown by as much as 20 percent in some segments.
“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,” said CAR researcher Kristin Dziczek, “it was clearly a very successful policy intervention at a critical time.”
[Source: The Detroit Bureau]