DETROIT – Accountants, journalists and politicians are frantically calculating whether taxpayers will recover the $80 billion they invested in the turnaround of General Motors and Chrysler.
Was it worth it?
This week, the Ann Arbor, Mich.-based Center for Automotive Research issued a study that says most likely yes.
The upshot: doing nothing would have triggered an economic apocalypse.
Kristin Dziczek, who led the study, said multiplying stock prices by number of shares misses a key point.
More than 1.4 million jobs, most of them at suppliers, service and other vendors, would have been lost had the two companies been liquidated. In reality, about 193,100 jobs tied to GM and Chrysler were lost last year. Another 171,200 are being lost this year.
“We’re weighing it against what would have happened if the government had not intervened,” Dziczek said.
Because each job at an automaker helps generate about 10 jobs through the rest of the economy, compared with two for retailers or six for electrical equipment makers, according to Deb Menk at the Center for Automotive Research, saving GM and Chrysler had a broader and quicker job-saving ripple effect.
So the total outlay was $80 billion. GM, Chrysler and Chrysler Financial have paid back $13.4 billion in principal, according to the Treasury Department.
The Center for Automotive Research study says the federal government would have spent $28.6 billion more than it did on unemployment benefits, Medicare, Social Security and other programs had the automakers liquidated.
So the entire rescue will pay for itself if the government can generate $38 billion from selling its shares.
Remember, Chrysler’s shares won’t be sold until the second half of 2011. The cash GM raised this week will be an important first step.
GREG GARDNER / Detroit Free Press