The US government bailout of General Motors spared 1.2m jobs in 2009 and preserved US$39.4bn in personal and social insurance tax collections in 2009 and 2010, according to a Center for Automotive Research study.
“Any complete cost-benefit assessment of the federal assistance to GM in its restructuring must consider the total net returns to the public investment…” researchers Sean McAlinden and Debra Maranger Menk wrote in The Effect on the US Economy of the Successful Restructuring of General Motors.
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General Motors published the claim after learning US Treasury Secretary Jack Lew had announced the federal government had sold its final shares in the automaker, leaving taxpayers with a $10.5bn loss on the $49.5bn bailout.
The move means the country’s largest automaker finally is free of government pay restrictions for top executives and can again pay dividends on its common stock, the Detroit News noted.
The infusion of money into GM and Chrysler by the administrations of Presidents George W Bush and Barack Obama avoided loss to the US of $105.3bn in transfer payments and personal and social insurance tax collections. Additionally, 2.6m jobs were saved in 2009 alone and $284.4bn in personal income was preserved over 2009-2010.
“If the US government had refused to assist (GM and Chrysler)… in a financial crisis of unprecedented proportions, then the whole US economy was operating without a safety net, with the exception of course, of the banking system,” McAlinden and Maranger Menk concluded.
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By GlobalDataThe centre independently funded the new study as a follow up to a November 2008 analysis.
GM chairman and CEO Dan Akerson said: “The US Treasury’s ownership exit closes just one chapter in GM’s ongoing turnaround story. We will always be grateful for the second chance extended to us and we are doing our best to make the most of it.”
Akerson will make a major speech in Washington, DC on 16 December to talk about GM’s investments in US factories and job growth, the Detroit News said.
GM North America President Mark Reuss tweeted after the treasury announcement: “Free at Last, Free at Last — thanks to all of the hard work and those who gave us a chance.”
GM spokesman Selim Bingol declined to comment to the paper when asked when GM might increase pay for executives, saying in an email that the automaker would not comment on the government’s stock exit beyond its statement. But an ease in restrictions would give GM’s board more flexibility to attract a new CEO when Akerson, 65, decides to step down.
President Barack Obama praised the auto industry turnaround.
“I refused to walk away from American workers and an iconic American industry,” Obama said in a statement. “But in exchange for rescuing and retooling GM and Chrysler with taxpayer dollars, we demanded responsibility and results. In 2011, we marked the end of an important chapter as Chrysler repaid every dime and more of what it owed the American taxpayers from the investment we made under my administration’s watch. Today, we’re closing the book by selling the remaining shares of the federal government’s investment in General Motors.”
The treasury ended its ownership stake in Chrysler Group LLC in July 2011, incurring a $1.3bn loss on a $12.5bn bailout.
After the sale of remaining GM shares, the US government’s only asset remaining from the overall $85bn auto industry bailout is a 64% stake in Ally Financial, the auto lender once known as GMAC. The government has recovered about two-thirds of its $17.2bn bailout and hopes to close that chapter next year, the Motown paper said.
The treasury had said this month that higher than expected trading in GM stock was speeding its exit and that it planned to wrap it up by 31 December.
Until the latest sale, the treasury said it held just 2.2% of GM shares — 31.1m, down 70m from late September — a fraction of the 912m shares it received in July 2009 as part of the bailout.
