GM bailout proper, as is divestment now

Monday, December 24, 2012
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Daily Gazette, The (Schenectady, NY) - Saturday, December 22, 2012

Though the U.S. government may end up with a loss of roughly 23 percent when it sells the rest of its General Motors stock over the next 15 months, the loss that its $50 billion investment staved off would have been substantially larger, to taxpayers as well as auto workers. So while the bailout of a huge money-losing enterprise isn't the sort of thing the government should normally get involved in, the mess that had befallen GM was anything but normal, and it came along at a time of great peril for the entire U.S. economy. Clearly it was justified, and paid off.

According to a study released two years ago by the nonprofit Center for Automotive Research, the collapse of GM and Chrysler would have cost 1.4 million auto industry jobs and $121 billion in personal income. Moreover, the government would have had to spend $28.6 billion in additional unemployment benefits, Medicare, Social Security and other programs.

And that doesn't even take into account the impact all those additional unemployed workers would have had on industries unrelated to the Big Three: Jobless people often can't pay their mortgages, they have less money for essentials like food and clothing, and even less discretionary income.

Under the best of circumstances, a GM collapse would send shock waves reverberating through the U.S. economy. But at a time the economy is already under enormous stress (as it was then), it might be fatal. Or as President George W. Bush famously put it a few months before his successor completed the bailout , "this sucker could go down."

The bailout was contingent on some major sacrifices by GM : The company had to close a dozen factories and renegotiate its budget-busting labor contracts. The retooled manufacturer is in fighting shape nowadays, having earned record profits of $7.6 billion last year.

It, and its stock, would probably be doing even better but for some consumers' reluctance to buy from "Government Motors." That's why the time is right for Uncle Sam to finish divesting itself of its GM holdings.

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December 25, 2012
10:24 a.m.
wmarincic says...

Bullcrap, GM and Chrysler could have filed the same bankruptsy that they did without the government. The only thing the government did was hand over billions to the unions while screwing the stockholders. What a bunch of crap.

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