Auto bailout saved 1.5 million U.S. jobs -study
DETROIT Dec 9 (Reuters) - The federal bailout of General Motors Co, Chrysler and parts suppliers in 2009 saved 1.5 million U.S. jobs and preserved $105.3 billion in personal and social insurance tax collections, according to a study released on Monday.
The Bush and Obama administrations loaned the auto industry, including GM and Chrysler, which is now controlled by Italy's Fiat, $80 billion to avoid the collapse of the industry that they felt would result in the loss of millions of U.S. jobs.
Critics of the bailout at the time had argued the companies should be allowed to fail and the industry that resulted from the aftermath would be stronger. Treasury officials have repeatedly said the bailout was not an investment meant to turn a profit, but a move to save U.S. jobs.
The Center for Automotive Research (CAR) in Ann Arbor, Michigan, estimated in its study that the bailout saved a lot of jobs, even crediting for a rebound of the industry in 2010 after the initial fallout.
"Two consecutive executive administrations in Washington decided in late 2008 and early 2009 that the consequences of the potential losses and outcomes to the U.S. economy ... were worth avoiding through a federal intervention," Sean McAlinden, the center's chief economist, said in a statement.
"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," said McAlinden, who wrote the study along with Debra Maranger Menk.
The U.S. Treasury has said it will exit the last of its stake in GM by the end of the month, clearing the way for the U.S. automaker to operate without the nickname "Government Motors" that executives said had hurt sales some.
GM North American chief Mark Reuss said on Monday that some consumers may consider buying from the automaker immediately after the government has exited its stake, especially where the company sells trucks.
Reuss said a huge psychological barrier will be lifted when Treasury sells the rest of its remaining 2 percent stake this month.
"This has been a long, hard road with no repeat customers and the label of Government Motors," he told reporters at an event outside Detroit.
He acknowledged some critics will highlight the money lost in the bailout, but pointed to the jobs, plants, towns, suppliers and related service industry jobs saved by the bailout under the Troubled Asset Relief Program (TARP).
"How do you put numbers on that?" he said. "I feel good about that and I'm not sure it was the same with the other industries that were granted TARP funds."
CAR estimated that a complete shutdown of the industry that was bailed out in 2009 would have resulted in the loss of 2.63 million jobs and those losses would still have stood at more than 1.5 million in 2010. If only GM had been shut down, the job losses would have been almost 1.2 million in 2009, shrinking to 675,000 in 2010.
While U.S. Treasury's final loss on the bailout is estimated at $13.7 billion including $11.8 billion related to its investment in GM, it avoided the loss of $105.3 billion in unemployment benefit payments and the loss of personal and social insurance tax collections, according to CAR.
In the GM-only scenario, the lost tax collections would have totaled $39.4 billion, according to CAR.
CAR said the study did not take into account the benefits of preserving the pensions of almost 600,000 GM and Chrysler retirees as well as industry research and development jobs. It also did not account for the psychological impact the collapse of GM and Chrysler would have had on the U.S. industrial base.
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