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Chamber President Discusses Auto Bailout of 2009

The 2012 campaign season has once again brought to the forefront the decisions made by both the Bush and Obama Administrations to throw a lifeline to General Motors and Chrysler.  Some, like Cato Institute’s Daniel Ikenson (in his January 25th article) are quick to criticize these decisions.  As a Republican, a smaller government conservative and the leader of a business organization, I understand where Mr. Ikenson is coming from – but he fails to consider five critical points:

First, Ikenson’s claim that “Ford, Honda, Toyota, Nissan, Mazda, Kia, Hyundai, BMW and Mercedes Benz were fine” is incorrect.   Not only was the entire industry in a free fall, many of the home countries of our international competitors offered some assistance to their auto companies.  The United States acting to support United States-based companies was a mirror of what other nations did for their companies.  While I am a strong advocate for free trade, I am not in favor of unilateral disarmament.

Second, Ikenson’s claim that Ford was denied “the spoils” of government assistance to GM and Chrysler is not altogether correct.  Ford supported assistance to its competitors.  Had GM and Chrysler collapsed, many critical suppliers that service all three companies would have been shuttered – therefore denying Ford the necessary parts to build everything from F-150s to Focuses.  (By the way, about 70% of today’s automobile, regardless where manufactured, is not made by the company with its name on the hood.  70% of today’s vehicle is made by supplier companies large and small.)

Third, the bi-partisan effort to provide assistance to GM and Chrysler was not about saving these two companies.  It was about saving the companies and jobs associated with the countless suppliers and dealers across the country – and the communities where they reside.  It was also about protecting American intellectual property.  Even if you are not a fan of the Cadillac DTS or the Dodge Journey, there is no doubt that GM and Chrysler have tremendous and highly valuable intellectual property.  I don’t know about you, but I’d rather not have American IP being sold to our international competitors in a court ordered bankruptcy.

Fourth, criticizing the government’s assistance to these two companies is easy now that it is 2012 and the industry has rebounded so smartly.  Back in 2008 and 2009 things looked very different.  Our nation was headed into a very dark hole and no one knew where the bottom was.  The damage to the national psyche had two of the world’s best known companies been forced to unravel could have been devastating.  While we will never know what the impact would have been, there are some things too serious to gamble with – especially if you are the leader of a nation and the responsibility is yours.  Not everyone has the luxury of serving as a spectator from the seat of a think tank.

Fifth, it worked.  Of all the things government has tried – and failed – the decision to give the U.S. auto industry another chance has paid-off even better than I could have hoped.  Most of the loans to GM and Chrysler have been repaid to the taxpayer (with interest) and when the Federal Government sells its equity stake in GM, it will have made a profit.  Not bad for government work.

Sandy K. Baruah
President & CEO
Detroit Regional Chamber