Now that it's been almost two years since the government rescue of GM and Chrysler, a review of what happened is in order.
First, a clarification. There was no "bailout." President Obama's team refused their bailout request and forced then into Chapter 11 bankruptcy. This allowed for the reorganization and continued operation of those companies, but shareholders lost everything. Bondholders also lost most of their investment. Union retirees were forced to give up their guaranteed benefits and take stock that would be worthless if the companies didn't succeed. Executives were fired. TARP funding was required because private capital markets were frozen at the time, but to call this a bailout, like the banks received, is simply not accurate.
It was predicted that government meddling would result in both car companies being forced to produce unsalable "green" cars. What actually happened: GM and Chrysler have returned to profitability selling mainly trucks and SUV's like the Chevy Equinox. The new Jeep Grand Cherokee is flying off showroom floors. Although the Chevy Volt has been universally acclaimed by the press, it is the more prosaic small, traditional cars like the Cruise and Malibu that are generating profits and regaining customer loyalty for GM. The automotive press has even been impressed by Chrysler's quick revamping of vehicles like the Chrysler 200 and Dodge Journey. Managers in both companies have said the Obama administration has given them a free hand to do whatever is required to maximize profitability.
It was claimed by conservatives that "Obama Motors" was a sinister attempt to socialize the American automotive industry. What actually happened: now that they have returned to profitability, a significant share of the government's stock in GM has been sold to the public, making them a minority owner, and the Treasury Department is eager to sell the rest on a timetable that maximizes profits to the taxpayer.
It was claimed that the bailout of the car companies would cost taxpayers tens of billions of dollars. What actually is happening: analysts state that the final cost to the taxpayer will probably be less than ten billion, and we may even come away with a profit. The cost to the taxpayer would have been many, many times this amount if the two companies had been allowed to fail.
It was claimed that the bailout was unfair to the other car companies who didn't get government help. What actually happened: Ford, Toyota and Honda all begged the Obama administration to save GM and Chrysler. Failure would have caused the automotive supplier industry in America to collapse, and the other car companies - with America's economy - would have been sucked into the vortex.
Finally, it was claimed that the companies would ultimately fail under government ownership - because after all, the government can't do anything right. Only the private sector can run a manufacturing company. What actually happened: it was under private ownership that these companies failed! The Obama administration assigned respected leaders from the private sector to work with the courts and oversee the reorganization of these companies. The old guard was fired and replaced by private-sector executives with proven track records. The government never "ran" GM or Chrysler, but it acted as a catalyst to reorganize and get private sector management in place that could get the job done. And it worked. Both companies are thriving. Prospects for long term survival are excellent.
Most of all, the blue-ribbon team the Obama administration assembled from the private sector recognized that although the financial and business management of the two companies was a disaster, they also recognized there was significant value in their American technology and engineering. Value worth saving, especially since the Toyota debacle taught us the Japanese aren't car gods.
We see the wisdom of their actions today in the products coming out of both companies, products that are receiving acclaim from the automotive press and are selling well. Hundreds of thousands of high-paying American manufacturing and support jobs have been saved, including right here in Northern Utah. The taxpayer was spared the tremendous costs of liquidation. American technology and engineering capability was rescued from the scrap heap. Projected healthy increases in automobile production this year will play a large role in creating new jobs and leading America out of the recession.
Conservatives can argue the rescue of GM and Chrysler was an ideological mistake until the cows come home. Be my guest. But one thing you can't deny. It worked.
No wonder anti-government ideologues hate it so much.
Olsen lives in West Haven.
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