CAR Research Memorandum: The Impact on the U.S. Economy of the Successful Automaker Bankruptcies

Full Description:

In late 2008 and throughout much of 2009, the global economy was in recession and the world’s automotive industry was in crisis. In the United States, automotive sales plummeted to historically low levels, both automotive commercial and consumer credit availability contracted sharply, and critically, two major automotive manufacturers—General Motors and Chrysler—were on the brink of collapse. Across the globe, federal, state and provincial governments stepped in to provide aid to the Detroit-based automakers with operations in their countries. These loans and other financial assistance provided to General Motors and Chrysler by the U.S. and foreign governments averted certain economic catastrophe had the companies been allowed to fail. Now that sufficient time has passed since the U.S. policy intervention, it is possible to evaluate the magnitude of the economic disaster averted, and weigh the public and private benefits against the public cost of aid to General Motors and Chrysler.