The saving of the Detroit auto industry is a popular thing to talk about during this election cycle. President Barak Obama was instrumental in engineering the structured bankruptcy and the investment in the industry that was needed. Mitt Romney, the son of an auto executive, said he would have allowed them to crash.
Even hindsight can’t tell us if the
dire prediction about the failure of the auto industry would have ever come
true. But, a threat of some kind was
there. It is too easy to say that they should
have allowed the industry to fail because new industry would have risen
from the crumbling empty auto plants. Even
if one did, how long would it have been before the benefits of the market
failure would have worked its “magic?”
The truth is, in practical terms the
auto industry is alive, improving and perhaps in the best condition it has been
Dan Ackerson, CEO of GM, in an
interview with The Take Away’s Celeste Headlee, points out that this wasn’t the
first time the country has saved an industry and that the benefits were much
more far ranging in practical terms.
Ackerson is a Republican. As a
Republican, he is not likely to give an interview in support of something that
a president and congress from the other party did in an election year if he
didn’t think it was an important thing to do.
Let’s read what Ackerson had to say
about the investment we made in the auto industry.
Dan Ackerson -”This is not the
first time that the American government has injected themselves into the American
economy. If I asked you, who [was] the biggest owner of commercial property in
the United States 1990s, you wouldn't say the United States, but it was. [During]
the Savings and Loans crisis, [the U.S.] [pumped] in $394 billion dollars. Call
it around $400 billion dollars. Not $50.
“So it's not unusual to see
governments for a short period of time, inject themselves into a marketplace to
stabilize it. The analogy I like to
make, you remember last year when Joplin, Missouri had the terrible tornado or
Katrina [in Louisiana], it's in the basic DNA of Americans [that] we don't walk
to help our fellow citizens, we sprint. This
part of the country, the arsenal of democracy saved this country in many
respects along with many soldiers, marines, coast guard's men. But it built the arsenal that saved Western
During the world wars in the last
century, it was the heavy industry that we had on our home turf and owned by
United States companies that built the machinery to defend ourselves and our
allies. Without that heavy industry
already in place, it is hard to image that we would have been able to build all
the factories needed before we built one tank in time to make a
difference. As another example, during
the early part of the last century, the shipbuilding industry was in the same
situation as the auto industry was during the last few years. The United States stepped in to save it
because of the importance of having the ability to build on our own
shores. Can you image the need to build
heavy equipment in times of a crisis and expecting Honda of Ohio and the other
foreign auto companies in Georgia to do the building? What would happen if we went to war with the
home countries of those companies?
Ackerson continues - “[After World
War II] what did we do[?] In the
interest of international economy, international trade, we lowered our trade
barriers. We lowered them in Japan, we
lowered them in Germany, our mortal enemies. And they built export economies to the
detriment of this part of the country. It
didn't happen overnight with a hurricane or tornado: It happened over 30 years.
So a million jobs were saved, that's
what I say. $150 billion it's been
reported in terms of total tax revenues that would've gone by the boards had
the company not been saved.”
That doesn’t include the increase
in taxes on surviving companies to pay for the unemployment benefits that would
have been paid on those that lost their jobs.
Instead, as Ackerson says, many auto workers didn’t lose their jobs and
are still paying taxes.
Ackerson - “And all the supply
chain that would've gone with us. And
then if you back off and you say, at the time we went under, or we went into
bankruptcy, we had about a $25 billion pension deficit. But think back if we'd gone into bankruptcy
and liquidated in '09. That $25 billion
would've gone into the PBGC (Pension Benefit Guarantee Corporation) which is
government sponsored. Footnote to that
comment is, $25 billion would've bankrupted PBGC. And whose dime would that've been on? It'd have been on the taxpayer’s dime. That's never in the calculus.”
It might be said that if we hadn't
backed the PBGC, we wouldn’t have had the problem with the pension deficit
bankrupting the system. But, then there
would have been no pension money for all those currently retired and those that
have worked for many years depending on the pension fund.
As for finding private money to
invest in GM, Ackerson also addresses that issue. Ackerson at the time GM was going
through its problems was managing private equity money for investors. This is what he has to say about finding
Ackerson – “So when people say, it
should've been saved in another way, it should've gone through a bankruptcy,
controlled bankruptcy. I was in private
equity. I was managing many buyouts,
where you do a big buyout of corporations with a portfolio of $50-$100 billion.
There was no way you could've gotten me
to put a billion dollars into this thing without the restructuring that was
really mandated by the government.
“So, you know I know this is a
political year and everybody wants to argue for tactical and political
advantage. Again, I don't have the
luxury to do that. I'm not making a
political statement. I would say, let's
be pragmatic about it: It worked.
Finally, Ackerson says, “I think
the government does have an obligation to step up and help its people. This wasn't a giveaway. It was an investment. It was an investment from the American people.”
Communities are not a separate
entity from the people that live in them.
They are not there to just police the streets and facilitate common
services. Communities form for the
safety net and security that they provide.
Thank you, Mr. Ackerson. Your words represent the best of a