Do you remember the cries at the time the auto industry was bailed out, about government interference in private business? Ford was able to go it alone, but both GM and Chrysler filed for bankruptcy and sheepishly applied for federal loans. During the last days of 2008 and the Bush administration, the president pushed through temporary measures to keep the car makers going, against the protests of senior Republicans in Congress, who held up the assistance and demanded bigger wage concessions from the auto unions. The fate of 3,000 parts suppliers was also tied up in the GM and Chrysler aid.
Now Chrysler is about to pay back its $7.5 billion loan several years ahead of schedule, saying that they've found better interest rates in the public capital markets. (It's ironic that the loan repayment from Chrysler, which itself is fairly fresh out of bankruptcy, will provide a few hours of spending cash to the U.S. government, since our borrowing lines are full.)
Was it right to ask U.S. taxpayers to bail out GM and Chrysler? Of course it was. Foreign manufacturers sell about half of the cars in the U.S. these days, and employment in the industry is down to about 700,000 -- not even one percent of the U.S. private work force -- but it's nonetheless an important manufacturing sector. See below, the blue line: jobs are coming back.
Auto sales have recovered to an annual pace of about 13 million, although that is still slow. The automakers are showing profits again, and Chrysler has reported sales gains in 2011 of 18 percent through April. Chrysler today employs about 51,000 people, although the company is owned primarily by the Italian company Fiat.
On its investment in saving the auto industry, the U.S. government will probably lose money, as Treasury Secretary Geithner said last week on a visit to Detroit:
Still, Mr. Geithner said, the Treasury was working to get the best possible return on taxpayers' investment.
"We didn't do these things to maximize return. We did them to save jobs," he said. "The biggest impact of these programs was in the millions of jobs saved."Looking back to late 2008, not only were the 700,000 directly auto-related jobs at stake, but many of those in places where car factories are situated, too.
More recently, manufacturing jobs are returning to Michigan, some of them as suppliers of technology for auto innovations. Recently I wrote that Michigan showed some of the largest gains in jobs in March, much coming in manufacturing.
Our economy is still very fragile, and even though corporate profits are at all-time highs, new jobs are hard to come by. The Senate Republicans' view that government shouldn't get involved looked foolish then, and in view of business's weak response since, looks just as foolish now.
Was it right, and worth the risk, for the U.S. taxpayer to bail out the auto industry? Of course it was.