The further success of General Motors and Chrysler is by no means guaranteed, but the decision for the federal government to spend tens of billions of dollars to bail them out was the right one, Treasury Secretary Timothy Geithner wrote in an Op-Ed published in The Washington Post
. Geithner noted that American automakers have returned to profitability just two years after GM filed for bankruptcy.
|Timothy Geithner: "We cannot guarantee their success . . . But we’ve given them a better shot. (AP Photo)
“The industry has added new shifts and 115,000 jobs, and GM and Chrysler have returned more than 50 percent of the government’s investment,” he wrote. “The industry is mounting one of the most improbable turnarounds in recent history.”
The industry was facing the prospect of liquidation when President George W. Bush first provided the two automakers $17 billion in loans in December 2008, he wrote. (Ford Motor Co. eschewed the bailouts.) When the Obama administration came in in 2009, it was clear that more money was needed.
“The companies needed to make dramatic changes. Years of bad decisions had caused them to progressively lose market share to foreign competitors, and the financial crisis had dried up financing for almost everything, compounding the collapse in demand for vehicles. It was not clear whether there was a responsible way to put taxpayer dollars on the line in a way that helped ensure the companies emerged stronger, not weaker.”
However, Geithner said the link between the automakers and their supply chains and dealerships “led some experts to estimate that at least 1 million jobs could have been lost if GM and Chrysler went under.”
In return for the bailout, the government demanded tough concessions from Chrysler and from GM. They were forced to go through bankruptcy and adopt plans that would lead to profitability. The sacrifices, he wrote, included those from managers, unions, stockholders, creditors and dealers.
“Today, six years earlier than planned, Chrysler has repaid its outstanding government loans. While it has a long way to go, Chrysler has made enormous strides. Tough decisions, stemming from the restructuring, have helped Chrysler post five consecutive quarters of operating profit. It has announced more than $3 billion in investments in plants and technology since emerging from bankruptcy and is poised to hire back workers.
“The story has been similar for GM — and the industry as a whole. The domestic automakers are getting stronger. For the first time since 2004, each has achieved positive quarterly net income.”
Geithner acknowledged that the government will “not get back all of our investments in the industry, we will recover much more than most predicted, and far sooner.”
He concluded by noting, “We cannot guarantee their success, and at some point they may stumble. But we’ve given them a better shot. The choice to stop the American automobile industry from unraveling was the right one.”
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