Though my gut told me the government shouldn’t bail out the auto industry, self-interest (36 years in machine tools) may have influenced my grudging support. As the debate gathered momentum everyone had an opinion, most driven by emotion, politics or ideology.
Many concluded the bailout was a classic example of federal government overreach. Looking back now, I don’t think so. I think the bailout went forward for three reasons, all of them sound:
1. The administration analyzed the risk and decided that a strategy to save the industry had a good chance of succeeding.
2. Letting the industry fail partially (perhaps Ford could survive) or totally would cost our economy far more than a bailout that left an auto industry on long-term life support.
3. The manufacturing infrastructure and knowledge base that supports the auto industry is strategically important for sustained growth of the economy and vital to our national security interests.
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The plan came just after TARP, but it was different from TARP. This time, the government did not infuse the auto industry with no-strings cash as TARP did for the banks in its haste to stem financial collapse. With the help of the Presidential Task Force on the Auto Industry, the government crafted the Auto Industry Support Program to save billions of dollars and more than a million jobs. The plan was designed to retain strategically important infrastructure and set the stage for a manufacturing expansion that could be the engine for a sound economic recovery built on steady, sustainable growth instead of the next big boom bubble.
A little over a year in, our investment is paying off. Repayment of government loans is on track or ahead of schedule. GM, Chrysler and Ford have operating profits for the first time since 2004. GM is preparing for an IPO, from which the government stands to make billions of dollars when it sells its stock and divests its interest as planned. The Big Three have rehired more than 60,000 workers since June 2009, and growth continues, though not in a “business as usual” manner. Among many austerity measures, the unions have made extensive concessions, and management rolls and salaries have been cut. The electric-powered Chevy Volt is now ready for sale and sets a new tone for the U.S. auto industry. Plus, the machine tool industry is doing pretty well, too. We shouldn’t take any of these successes for granted. We can only imagine what might have been had politics, ideology or emotion carried the day.