Research: Auto Bailout Saved 1.14 Million Jobs

Government assistance to General Motors and Chrysler enabled orderly bankruptcy proceedings and led to the saving of more than 1.14 million jobs in 2009 alone, according to a new study from the Center for Automotive Research, an Ann Arbor-based nonprofit research organization.

The research also showed the bailout averted huge unemployment and welfare payments and as a result is already more than a quarter of the way to break-even status.

CAR researchers modeled the impact of the $80 billion in federal aid to General Motors, Chrysler, GMAC and Chrysler Financial using actual economic performance for 2009 and 2010 to date. In addition to the jobs saved in 2009,  314,400 more jobs have been saved so far in 2010.

The report says the government intervention prevented additional personal income losses of $71.9 billion for 2009 and $24.6 billion for 2010. The net impact to the federal government -- in terms of changes in transfer payments such as unemployment compensation and welfare, social security receipts and personal income taxes -- was $21.6 billion 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," said CAR chief economist Sean McAlinden. "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."

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," Dziczek said. "Although automotive sales were weaker, the Detroit Three market share held up better than anticipated in this smaller market. 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."

(c) 2010, WWJ Newsradio 950. All rights reserved.