The Auto Bailout Bluff
In these closing days of the 2012 campaign, the President proudly claims his bailout of the automotive industry is a shining example of successful economic policy. He says he saved the industry and 1 million jobs.
The number of jobs saved by the Obama bailout is nowhere near 1 million. GM and Chrysler both went bankrupt anyway. Chrysler is now foreign owned. Taxpayers are still owed $37 billion of an $80 billion bailout.
A cost/benefit analysis of the auto bailouts shows it was not a wise investment of taxpayer dollars.
This table shows a snapshot of automotive industry jobs at three times:
- Before the recession in January 2008
- At the lowest depths of the recession
- After the recession in September 2012
This data comes from the Bureau of Labor Statistics and includes all automaker job types in the United States. Those jobs are auto and parts manufacturing, vehicle and parts retail sales and auto dealerships.
Automakers in the United States included:
- Chrysler (Fiat)
GM and Ford are the only major U.S. automakers that are still American owned.
Before the recession in January 2008 there were about 4 million automotive jobs. At the height of the recession -849,000 jobs were lost. Since then +350,000 of the lost jobs have been recovered.
According to cars.com, GM has about 91,000 and Chrysler 37,000 direct manufacturing jobs today. GM and Chrysler, the bailout companies, therefore affect about 20% of the total automotive industry in this country.
The President hardly saved an entire industry or a million jobs. The theoretical absolute worse case scenario affects about 800,000 jobs.
Even if liquidated, most of GM and Chrysler facilities and jobs would have been absorbed by Ford and other foreign companies. They would have not been shut down.
The automotive bailout is the only major TARP spending that has NOT made money for taxpayers.
The much hated big banks and AIG that were all bailed out by TARP have paid back their loans with interest. For their investments, taxpayers made $33 billion off them.
Taxpayers have lost on the automotive bailouts numerous ways.
- $7.2 billion lost in write-offs
- Automakers still have an outstanding debt of $37 billion
- Chrysler permanent cost taxpayers $1 billion
- GM will permanently cost taxpayers about $10 billion
- Chrysler was sold to Fiat at a $1 billion loss to U.S. taxpayers
- 20% of the bailout was for a finance company – Ally (GMAC)
The auto bailouts lost taxpayers money and didn’t save many jobs. GM and Chrysler make up about 20% of the U.S. auto industry. They cost $80 billion with $37 billion still outstanding.
U.S. taxpayers saved about 200,000 jobs. That’s roughly equivalent to 1 good month of job creation.
When the smoke cleared Chrysler was sold to Italian automaker Fiat with a permanent loss of $1 billion taxpayer dollars. Some jobs were saved but for a foreign automaker.
GM got a $67 billion bailout. $16 billion of that was to bailout its finance company, not the car company.
The auto bailouts are the only bailouts in TARP that lost money. The much hated big banks and AIG that were also bailed out with TARP have all paid back their loans with interest. Taxpayers have made $33 billion from them so far with more to come.
The Obama campaign is running a bailout bluff. They hope no one looks under the hood before Tuesday.