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Automotive executives share ideas at recent Center for Automotive Research breakfast briefing.

08-09 AUTO CRISIS: Ann Arbor Think Tank Gives Feds Credit for Intervening

January 14, 2014       Leave a Comment
By: Dave Rogers

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The federal government's intervention in the auto industry during the economic collapse of 2008-2009 is seen by the Center for Automotive Research (CAR) as one of the most successful in U.S. history.

Without massive federal aid, the industry likely would have recovered by 2011, but most production would have shifted from the Upper Midwest to foreign automakers in the Southern states, CAR reported.

Just as importantly, the states of Michigan, Ohio and Indiana might have suffered the loss of research, tooling, machining, design and other aspects of car making that have traditionally been located here.

Double digit unemployment might still be persisting in this region today, the report theorized.

"Critical pre-production activities are largely carried out in home countries by the international automakers and this important economic base would have been lost to the U.S. economy, perhaps forever," the report concluded.

Other states may have been hit obliquely, according to CAR: If GM and Chrysler had ceased to operate permanently in January 2009, almost 600,000 retirees of those firms would have certainly seen their company pensions delayed and reduced (as was the case with salaried workers at Delphi) and health benefits canceled. The Pension Benefit Guarantee Corporation (PBGC) would have been overwhelmed.

The majority of these retirees reside in the upper Midwest and a few retiree states (such as Florida and Arizona and the economic impact on those states would have been catastrophic.

Along with the loss of active automotive manufacturing employment, the additional loss of retiree income in these states would have produced a Depression Era economy in much of the upper Midwest.

Assuming other automakers could not replace GM capacity and employment until 2011, the U.S. government avoided the loss of $39.4 billion in increased transfer payments and lost taxes in just two years: 2009-2010. This is 334 percent of the projected $11.8 billion of Treasury funds not recovered on the public's investment in GM.

In this scenario, the U.S. economy avoided the loss of 1.2 million jobs in 2009 and the loss of $129.2 billion in personal income in 2009-2010.

In 2012, Alan Mullaly, CEO of Ford Motor Company, stated "If GM and Chrysler would've gone into free-fall, that could've taken the entire supply base into free-fall also, and taken the U.S. from a recession into a depression. That is why we testified on behalf of our competitors even though we clearly did not need precious taxpayer money."

(See: "Bailouts of GM, Chrysler, Were Good for Ford Too: Alan Mullaly." Alan Task. Yahoo Finance, Daily Ticker, June 26, 2012.)

International automaker executives including Nissan-Renault CEO Carlos Ghosn, and Honday CEO Takeo Fukui, publicly backed the U.S. government's assistance to GM and Chrysler in principle.



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Dave Rogers

Dave Rogers is a former editorial writer for the Bay City Times and a widely read,
respected journalist/writer in and around Bay City.
(Contact Dave Via Email at carraroe@aol.com)

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