What would have happened without the auto bailouts of GM and Chrysler?
From the CNN Article...
"This is central to the election debate over the bailout. Mitt Romneyclaims that if GM and Chrysler Group had gone through a privately-financed bankruptcy process, they would have emerged even stronger than they are today.
But many auto industry experts, including the Obama administration's former car czar, Steven Rattner, a Democrat, and former GM Vice Chairman Bob Lutz, a Republican, say there was no private-sector financing available in 2009 and the bailout was the only way to keep the companies alive.
"He thinks we didn't try to borrow money from the banks?" Lutz told theDetroit Free Press in February. "The banks were even more broke than we were. Who had the money?"
Without financing during bankruptcy, GM and Chrysler would have had to go out of business, taking down many suppliers. That would have likely caused bankruptcies at the healthier automakers such Ford Motor (F,Fortune 500), who would not have been able to get the parts they needed to build cars. That is why Ford went to Capitol Hill in late 2008 pushing for the rescue of its rivals.
The Center for Automotive Research, a well-respected Michigan think tank estimates that the bailout therefore saved 1.5 million U.S. jobs by keeping GM, Chrysler and the companies that depended on them in business.
Even if one assumes private financing could have been found, what's clear from Romney's own criticism of the bailout is that the autoworkers at GM and Chrysler today would have been far worse off today than they were with the bailout.
The pension plans for United Auto Workers union members at the companies were basically left untouched. It's likely that without Treasury financing those pension plans would have been dumped on the government pension agency, reducing payments to many retirees. Plus, automakers would have likely tried to cut wages in bankruptcy, as many companies do. That didn't happen during these bankruptcies since Treasury, not bankers, was calling the shots."
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