The Obama administration managed quite a deal for U.S. taxpayers when it rescued General Motors Co., Chrysler Group LLC and their financing arms in 2009, according to Moody’s Investors Service.
The bond rating service issued an endorsement of the auto bailout that started under President George W. Bush and was expanded by President Barack Obama to almost $82 billion.
In its report, Moody’s said the federal government would have lost more than $30 billion in revenue and spending had GM and Chrysler gone bankrupt. The company would have been “forced” to liquidate in the absence of government funds, Moody’s said.
That estimate of lost revenue alone is $5 billion more than the Treasury Department’s forecast in August that the auto bailout may cost the government $25.1 billion.
“While the price of the auto bailout was high, the cost of not acting would have been higher,” Sophia Koropeckyj, a managing director at New York-based Moody’s, wrote in the report issued yesterday. “Without assistance, the auto industry would eventually have recovered, as would the U.S. economy. But the process would have taken longer, caused more hardship, and cost more to taxpayers.”
If Chrysler alone had liquidated, the U.S. would have lost about 145,000 more jobs in 2009 and 2010, Moody’s estimated.
The Obama administration has said it was split on whether to save the company before eventually deciding to back an alliance with Italian automaker Fiat SpA.
If GM filed bankruptcy and liquidated, the economy would have lost about 550,000 additional jobs, Moody’s said. Those two bankruptcies combined may have led to failures of auto suppliers that supply Ford Motor Co., which “could have tumbled as well,” according to the report.
“This would have increased job losses to nearly 800,000 more than the baseline expectation,” Koropeckyj wrote.
Obama’s campaign has made the auto industry rescue a focal point of his reelection bid, with Vice President Joe Biden and strategist David Axelrod using the mantra “Osama bin Laden is dead, and General Motors is alive.”
Republican presidential nominee Mitt Romney said during the candidates’ second debate on Oct. 16 that Obama followed his recommendation in letting GM and Chrysler go bankrupt. Romney was misstating his earlier position. He opposed any use of taxpayer dollars to bail out the automakers.