Why Arguing About the Auto Bailouts Is Pointless

February 17th, 2012

Chevy Cruze: A sales hit for GM

Politicians are like 4-year-olds.

I’ll explain my reasoning for that in a moment, but I have a feeling many of you already agree.

In 2009, President Obama authorized the bailout of General Motors and Chrysler. It was a move that started with President Bush in 2008 and cost taxpayers tens of billions of dollars. Needless to say, the decision generated some serious controversy. I, for one, went on record on this blog as being against the bailouts. At the time, I figured the companies should accept the consequences of their poor financial decisions and dismal product quality. As it turns out, I don’t have a lot of say in Executive Branch decisions, and the bailouts happened regardless of my opinions.

Today, the U.S. auto industry is clearly back on its feet. GM had its most profitable year ever in 2011, pocketing over $7 billion. Factories are churning out good cars, and Americans keep buying them. Yet those bailouts of 2009 again dominate the news as the 2012 presidential election heats up. President Obama defends the bailouts as the tool that saved countless American jobs. Republican candidates Rick Santorum and Mitt Romney proudly and defiantly oppose them. To quote Mr. Santorum, GM and Chrysler would be

Rick Santorum

alive and equally as well, or better off, than they are now. The markets would have reacted to restructure it to be more competitive.

He says the bailouts were the wrong decision, and if he were president, he wouldn’t have authorized them, and things would be even better than they are now.

It’s a classic case of “I coulda done it better than you.” I remember a certain 4-year-old in my house who used to say the same thing.

The fact is, no one can really say if the auto industry would be better off, or worse, had the government not stepped in and saved it. Maybe the private sector would have come through and invested in the car companies. Maybe GM would have reported $10 billion in profits had Santorum been president in 2009. Or maybe General Motors and Chrysler would both have been liquidated by now.

Arguing about hypothetical situations is pointless. All we know is what we have.

The fact is, the auto industry was bailed out by the American government. As a direct result, we now have an auto industry that is, once again, making good money, making good cars and employing good people.

The auto bailouts are done, and they worked. Isn’t it time to move on to other topics in the political realm?

-tgriffith

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  1. Jim Redd
    | #1

    I can’t imagine going into Michigan and telling the people there the bailouts were a bad idea. You’re absolutely right- why whine about something that is over, done, and worked? Let’s talk about the future instead. Let’s talk about gas prices and oil supplies and alternate fuel sources… the fact that we even have an auto industry, in this current form, is thanks to the government. Bush started it and Obama finished it. Move on!

  2. Randy
    | #2

    The auto bailouts didn’t save GM and Chrysler, the bankruptcy process did. That was what allowed them to walk away from hundreds of billions in debt and shareholder equity. The bailout loans simply gave them operating cash to keep paying employees and suppliers during the bankruptcy process. While I commend Chrysler on repaying their loans as quickly as possible, GM has been less than honest with the taxpayers and still owes about half of what they borrowed. Even worse, the government took stock in lieu of much of the money, so in effect, GM has repayed very little. To me, it seems very shameful for a company like GM that comes crying and begging for public money and then cranks ten billion in “profits” while not paying back the money.

  3. panayoti
    | #3

    Courtesy of TTAC

    With GM’s recent announcement of $7.6 billion in profits for 2011, you would think that the taxpayers would get a nice chunk of those proceeds.

    Well, we’re not even half way to that ship yet. UAW shareholders though are a different story. GM recently announced that they will cut nice thick checks in honor of their UAW shareholders. As much as $7,000 in certain cases.

    This will indeed be GM’s largest profit sharing payout in history. The prior high? $1775 per UAW employee in the glory days of 1999. In the meantime Ford plans to fork over $6200 as a maximum. Part of that has been paid out already. As for Chrysler? $1500.

    For those working schmoes who live bonus free, you do have one solace to this bit of news. American taxpayers haven’t paid for all this quite yet. For now the financiers of GM’s recent success are indeed the shareholders of our national debt. So when you see signs of a bolstering middle class in middle America, make sure you take your hat off and thank a member of the Chinese Communist Party.

  4. Randy
    | #4

    Remember, the true financiers of GM’s recent success are those tens of thousands of investors who lost their investment, and more thousands owed debts by GM, who lost all their money. Would your personal fortune be vastly improved if you could walk away from all your debts? (especially if you owed ten times what you make a year?)

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