Even hindsight can’t tell us if the dire prediction about the failure of the auto industry would have ever come true. But, a threat of some kind was there. It is too easy to say that they should have allowed the industry to fail because new industry would have risen from the crumbling empty auto plants. Even if one did, how long would it have been before the benefits of the market failure would have worked its “magic?”
The truth is, in practical terms the auto industry is alive, improving and perhaps in the best condition it has been in decades.
Dan Ackerson, CEO of GM, in an interview with The Take Away’s Celeste Headlee, points out that this wasn’t the first time the country has saved an industry and that the benefits were much more far ranging in practical terms. Ackerson is a Republican. As a Republican, he is not likely to give an interview in support of something that a president and congress from the other party did in an election year if he didn’t think it was an important thing to do.
Let’s read what Ackerson had to say about the investment we made in the auto industry.
Dan Ackerson -”This is not the first time that the American government has injected themselves into the American economy. If I asked you, who [was] the biggest owner of commercial property in the United States 1990s, you wouldn't say the United States, but it was. [During] the Savings and Loans crisis, [the U.S.] [pumped] in $394 billion dollars. Call it around $400 billion dollars. Not $50. $400 billion.
“So it's not unusual to see governments for a short period of time, inject themselves into a marketplace to stabilize it. The analogy I like to make, you remember last year when Joplin, Missouri had the terrible tornado or Katrina [in Louisiana], it's in the basic DNA of Americans [that] we don't walk to help our fellow citizens, we sprint. This part of the country, the arsenal of democracy saved this country in many respects along with many soldiers, marines, coast guard's men. But it built the arsenal that saved Western Democracies.”
During the world wars in the last century, it was the heavy industry that we had on our home turf and owned by United States companies that built the machinery to defend ourselves and our allies. Without that heavy industry already in place, it is hard to image that we would have been able to build all the factories needed before we built one tank in time to make a difference. As another example, during the early part of the last century, the shipbuilding industry was in the same situation as the auto industry was during the last few years. The United States stepped in to save it because of the importance of having the ability to build on our own shores. Can you image the need to build heavy equipment in times of a crisis and expecting Honda of Ohio and the other foreign auto companies in Georgia to do the building? What would happen if we went to war with the home countries of those companies?
Ackerson continues - “[After World War II] what did we do[?] In the interest of international economy, international trade, we lowered our trade barriers. We lowered them in Japan, we lowered them in Germany, our mortal enemies. And they built export economies to the detriment of this part of the country. It didn't happen overnight with a hurricane or tornado: It happened over 30 years. So a million jobs were saved, that's what I say. $150 billion it's been reported in terms of total tax revenues that would've gone by the boards had the company not been saved.”
That doesn’t include the increase in taxes on surviving companies to pay for the unemployment benefits that would have been paid on those that lost their jobs. Instead, as Ackerson says, many auto workers didn’t lose their jobs and are still paying taxes.
Ackerson - “And all the supply chain that would've gone with us. And then if you back off and you say, at the time we went under, or we went into bankruptcy, we had about a $25 billion pension deficit. But think back if we'd gone into bankruptcy and liquidated in '09. That $25 billion would've gone into the PBGC (Pension Benefit Guarantee Corporation) which is government sponsored. Footnote to that comment is, $25 billion would've bankrupted PBGC. And whose dime would that've been on? It'd have been on the taxpayer’s dime. That's never in the calculus.”
It might be said that if we hadn't backed the PBGC, we wouldn’t have had the problem with the pension deficit bankrupting the system. But, then there would have been no pension money for all those currently retired and those that have worked for many years depending on the pension fund.
As for finding private money to invest in GM, Ackerson also addresses that issue. Ackerson at the time GM was going through its problems was managing private equity money for investors. This is what he has to say about finding private money.
Ackerson – “So when people say, it should've been saved in another way, it should've gone through a bankruptcy, controlled bankruptcy. I was in private equity. I was managing many buyouts, where you do a big buyout of corporations with a portfolio of $50-$100 billion. There was no way you could've gotten me to put a billion dollars into this thing without the restructuring that was really mandated by the government.
“So, you know I know this is a political year and everybody wants to argue for tactical and political advantage. Again, I don't have the luxury to do that. I'm not making a political statement. I would say, let's be pragmatic about it: It worked.
Finally, Ackerson says, “I think the government does have an obligation to step up and help its people. This wasn't a giveaway. It was an investment. It was an investment from the American people.”
Communities are not a separate entity from the people that live in them. They are not there to just police the streets and facilitate common services. Communities form for the safety net and security that they provide.
Thank you, Mr. Ackerson. Your words represent the best of a Responsible Community.
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