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Study: U.S. Aid to Auto Industry Saved 1 Million Jobs

Assistance saved nearly $100 million in personal income.

by on Nov.30, 2010

Government assistance to General Motors and Chrysler enabled orderly bankruptcy proceedings and led to the saving of more than 1.14 million jobs in 2009 alone, according to a recently released study by an automotive think tank.

The study, by the Ann Arbor-based Center for Automotive Research, estimated that an additional 314,400 jobs was saved in 2010. The government help save $96.5 billion in potential personal income losses and allowed $28.6 billion in social security and personal income taxes to be paid to the federal government.

At the time of the bailout, some pundits, and even some lawmakers, suggested that Chrysler and GM didn’t deserve the government’s help. Some even suggested that the bailout was a waste of government money.

“To date, $13.4 billion in principal has been repaid on the government’s $80 billion U.S. investment in the automotive industry. This study shows that $28.6 billion in net losses to the  U.S. Treasury were averted by the policy to provide federal assistance to General Motors and  Chrysler,” said Sean McAlinden, executive vice president of research and chief economist at  CAR. “With this in mind, CAR’s analysis shows the government need only recover $38 billion of the remaining $66.6 billion outstanding investment in this industry to achieve a two-year break-even.”

The study, which is available at www.cargroup.org was led by CAR researchers Kristin Dziczek, director of the Labor and Industry Group, and Debra Maranger Menk, project manager.

“The economy performed better than we had originally expected when we produced our  May 2009 forecast on the impact of ‘good’ versus ‘bad’ bankruptcies. Although automotive sales were weaker, the Detroit Three market share held up better than anticipated in this smaller market,” said Kristin Dziczek. “The federal decision to invest in the auto industry in 2008 and 2009 deployed critical resources to one of the country’s most productive industries with the highest economic multipliers of any industry. It was clearly a very successful policy intervention at a critical time.”

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