ANN ARBOR, Mich. – Government assistance to General Motors and Chrysler enabled orderly bankruptcy proceedings and led to savings of more than 1.14 million jobs in 2009 alone, according to a recently released Research Memorandum published by the Center for Automotive Research, (CAR). The memo examines the magnitude of the economic impact of the U.S. policy to provide aid to the auto industry in 2008 and 2009 and weighs the public and private benefits against the public cost. CAR researchers modeled the impact of the $80 billion in U.S. aid to General Motors, Chrysler, GMAC and Chrysler Financial using actual economic performance for 2009 and 2010 year-to-date. In addition to the jobs saved in 2009, 314,400 more jobs were saved in 2010. Further, the government intervention prevented additional personal income losses totaling $71.9 billion for 2009 and $24.6 billion for 2010, according to CAR's research. The net impact to the federal government — in terms of changes in transfer payments, social security receipts and personal income taxes — was $21.6 billion in 2009 and $7 billion in 2010.
“To date, $13.4 billion in principal has been repaid on the government’s $80 billion U.S. investment in the automotive industry. 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,” said Sean McAlinden, executive vice president of research and chief economist at CAR. “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.”
The study, which is available at www.cargroup.org, was led by CAR researchers Kristin Dziczek, director of the Labor and Industry Group, and Debra Maranger Menk, project manager.
“The economy performed better than we had originally expected when we produced our May 2009 forecast on the impact of ‘good’ versus ‘bad’ bankruptcies. Although automotive sales were weaker, the Detroit Three market share held up better than anticipated in this smaller market,” said Dziczek. “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. It was clearly a very successful policy intervention at a critical time.”
