Car czar: Auto bailouts saved Detroit, state of Michigan

Car czar: Auto bailouts saved Detroit, state of Michigan
By Drew Johnson - Posted March 11th 2010

General Motors and Chrysler might not be around right now if it hadn’t been for an $85 billion bailout by the United States government, but it appears as though that investment also saved the entire state of Michigan.
It’s no secret that Michigan’s economy is closely tied to the auto industry – after all, General Motors, Chrysler and Ford all call the mitten state home – but a new report reveals just how close Michigan came to following GM and Chrysler down the bankruptcy path.

Speaking at a recent event, Steve Rattner, President Obama’s former car czar, revealed that Detroit and the entire state of Michigan would have likely gone bankrupt if it weren’t for the government’s bailout of GM and Chrysler.
“The state of Michigan would have declared bankruptcy,” Rattner said. The home city of the automakers would have suffered a similar fate, with Rattner adding Detroit “certainly would have gone bankrupt” without government intervention.
The automaker bailout may end up costing U.S. taxpayers upwards of $30 billion, but that seems like a small price to pay to keep an entire state out of financial ruin.
References
1. ‘Former car czar says…’ view
44 COMMENTS
1. lovinGMyChevy140 days ago
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  Don’t get me started on the environmentalists that started this whole mess..
  
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2. anyclearer140 days ago
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  environmentalists?????????WTF are you talking about
  
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3. lovinGMyChevy140 days ago
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  The Environmentalists drove the Democrats to add so much tax onto our gas prices. This made GM and Chrysler customers turn to Toyota, because of fuel economy. Ever since, Toyota overtook GM as the Worlds largest automaker. I wonder what environmentalists think of Toyota now… lol
  
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4. TornadoGTI140 days ago
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  ??? I don’t get it either
  
  And trust me, as a resident of Michigan and metro Detroit in particular, it is still in ruin, whether financial or otherwise. Detroit is a peice and needs to be destroyed and built over. Like in the game Sim City when you have bad schools, poor services, unacceptable police force, shrinking cash flow, and your real estate values depreciating, you just quit, choose not to save, and start over. That is what Detroit needs to do right now.
  Michigan hasn’t got much without Detroit and needs to be saved so that Michigan can do well. Unfortunantely pretty soon, do to people evacuating, there isn’t going to be enough people to form a modest tax base and then taxes will have to increase causing more distain for the residents and then MORE people will leave because they cannot afford to live there. it is a cycle that cannot be broken.
  My employer just moved our offices from downtown Detroit to a suburb 20 miles North in an effort to evade the 1% business tax that is still being assesed. Both commercial and residentail residents are leaving.
  
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5. elantra_touring140 days ago
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  I agree with you TornadoGTI
  
  Wow what a shocker!! Detroit looks worse than alot of the third world contries I have been too. It is a discrace to America, it shows off Capitalism at its finest!! or is that communism?? I forget lol
  
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6. GMasaurus140 days ago
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  I am a former Detroiter and will always call it home. I lived in a rough section, but now, there are many, many rough sections of Detroit. I believe Tornado could not be more right. Bulldoze time. Amnesty time on Devil’s Night (Detroiters will know what I mean). Time to start over. Michiganders will make it through, though. But, wouldn’t it be nice to see a video with Eminem showing an amazing city instead of showing them tearing down Tiger Stadium? What a blight.
  
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7. JakeK66140 days ago
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  Do the RenCen really tower over the city like that? Wow.
  
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8. Borat140 days ago
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  So Michigan and Detroit received 85 billions, what other 49 states received or lost? Each saved job cost over 1 million bucks. There is no way there will be return on this investment. Kudos to prosperous Detroit and UAW, sad story for those who have to finance this.
  
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9. MXrider140 days ago
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  elantra_touring – I take it you’re a Michael Moore fanboy by your statement. Capitalism and communism are complete opposite. Capitalism is what made this country great, a competition driven free market. Capitalism is how that fat a$$ Michael Moore makes so much money off his bs. What is a little bit like communism though is how the UAW used to own the Big 3 and to a huge extent, still do. Once you get rid of the government and UAW controlling their every move, you’ll see real change in Detroit.
  
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10. lovinGMyChevy140 days ago
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  So do non of you guys remember the $5 gas prices??? Those prices were so high because of The environmentalists influencing the Democrats in Congress. When gas was so expensive, a ton of people went to Toyota for a new, more fuel efficient car. How does that not make sense to you guys?
  
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11. Road_AMS140 days ago
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  @elantra_touring – I am a former Michigander and lived in the Detroit metro area for many years. While I agree there is much to be desired in many parts of the city calling it a “discrace to America” (it’s disgrace, by the way) is completely asinine and ignorant. There are some great technologies and brilliant engineers that have come out of that city.
  
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12. lovinGMyChevy140 days ago
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  MXrider- LOVE your comment
  
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13. GeneralSTL140 days ago
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  Never been to Detroit, but I feel your pain……..St. Louis has many abandoned buildings, ruined neighborhoods, piss poor school system, etc. Interesting fact, Detroit and St. Louis compete on an annual basis for the title of ‘worst crime city.’ I forget who does the rankings. I believe Newark, NJ has won the title a few times too. Nonetheless, these two great midwestern cities will rebound……..I don’t know how, but they will.
  
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14. JakeK66140 days ago
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  GeneralSTL – I wish you are right. Don’t know, honestly if it’s possible though.
  
  St. Louis isn’t as bad though once you start leaving downtown. The surronding counties have some of the largest companies in their fields and are known for great track records. Scottrade and Edward Jones are two of the most successful companies these past couple of years and are growing – with awesome employee services. We have other highlights that people don’t realize are here too, such as ExpressScripts. Everything is out in the county though, as I’m sure many on here from St. Louis realize. Crime rates outside the city are very low and some of the “best places to live” are right around the corner (examples are O’Fallon and St. Peters).
  
  Has the city been hit with closings of Ford and Chrylser plants? Sure, but I haven’t really seen the impact around the suburbs since we have been moving from those companies for years now already.
  
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15. GeneralSTL140 days ago
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  JakeK66, I agree that the suburbs aren’t that bad at all……outside of North County, which is where I reside. The downtown area has made great strides over the past 10 years, with the lofts and all, but there’s still a ways to go. What really needs a complete overhaul is the whole north city. Don’t know if you travel in that area, but it looks awful, and no one wants to live there. The reluctance of compaines to build in the city limits and take the “if you build it, they will come” mentality never ceases to amaze me.
  
  Another interesting fact that I’m sure no one cares to hear – STL used to be the #2 auto producing city behind Detroit. Since our Ford and Chrysler plant closed, I imagine we don’t hold that title anymore.
  
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16. elantra_touring140 days ago
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  MXrider
  
  No I am not a fan of Michael Moore and could care less about him and his bulls!t movies. I said it shows off Capitalism in its finest I guess you dont understand my sarcasm. I believe in Capatalism all the way, my point is that for everything good there is always a drawback and Detroit seems to be hit hard by them. Capitalism lets me earn a respectable wage at others expense and I am fine with that, its not my fault others dont have the motivation in life to succeed, and work 9-5 in a cubicle of warehouse. I am as capitalist as it gets. As for the communism part I know we are not a communist contry, but in some ways we are as the goverment has to bail out private companies and own the major stakes.
  
  I hope you understand.
  
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17. savedsol140 days ago
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  To the “czar”: Don’t pat yourself on the back too hard a-hole.
  
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18. leftwingagenda140 days ago
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  not surprisingly, i disagree with borat…the 1 million dollars per job figure is not true, for one…and also, are you considering what the impact would be if the state of michigan went bankrupt? that wouldn’t cost the taxpayers more in the long run? really? i think that’s very much up for debate…
  
  i’ve spent many years in the midwest now, several in cleveland, and the story there is the same as detroit and STL…population shrinkage within city limits leads to higher taxes for those that remain, and drives corporations into the ‘burbs or off to other cities entirely…it’s a cycle that has gained momentum over time ever since manufacturing left the midwest…if you visit a vibrant city like seattle, or boston, or dc, it’s a very different vibe…but those cities have survived on tech and service industries…
  
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19. anyclearer140 days ago
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  lovingmychevy, i think you might wana get more acquainted with foreign affairs, the gas price problem has more to do with foreign countries who source the oil, and getting Americans off gas is a good idea that needs to be solved sooner then later, not for environment but with the rate we use oil, it wont last forever, and should have another way of driving then off gas, it will run out and that point would be to late to try and change it would be a disaster.
  
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20. MXrider140 days ago
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  @ elatra_touring.
  
  That’s the thing about the internet and these posts, it’s hard to tell someone’s tone sometimes. I apologize, I thought that you were one of the idiots that benefit from the United States and go around bashing it because it’s the cool thing to do right now. There are a lot of those kinds of posts on this site. Sorry again.
  
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21. JakeK66140 days ago
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  GeneralSTL –
  
  I don’t know if there is anything you can do on North city. It’s politicians are so curropt, who would invest there? There has been people who have tried and almost everyone has failed. Funny thing is, North City has been bad for over a century, so it’s really nothing new. Many of the immagrants who first came in went into that area.
  
  Right now the money goes west. St.Charles, Earthcity (Maryland Heights) and West County are the places people want to be and invest in. I don’t know if I want to change that either since I live where things are going to.
  
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22. elmdodge140 days ago
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  jeez can steve rattner now save calif, new jersey, new york , hell maybe even greece ,
  
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23. DrFill140 days ago
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  GMChevy
  The Democraps didn’t make GM buyer run to Toyota/Honda
  GM made them run to Toyota/Honda
  
  When Toyota was making Camry the best car you could buy
  GM was making Achievas, Grand Ams, Bonnevilles, Caprices
  And every other piece of monkey crap they could come up with
  
  That’s the biggest Cop-out in the world
  
  Cop out
  Speaking of monkey crap……
  DrFill
  
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24. teahead140 days ago
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  Let’s not forget…the RED STATES proportionally get more gov’t aid (read: WELFARE) than BLUE STATES.
  
  ’nuff said.
  
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25. A4140 days ago
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  OH THANK GOD, cause Detroit would certainly, CERTAINLY have been missed by all.
  
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26. rarson140 days ago
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  The problem with Michigan is government. The state government doesn’t know how to run a budget and never bothered to do anything but let the automakers carry the economy. Once they finally noticed that the automakers weren’t doing so well, that idiot Granholm decided that ethanol is the future for Michigan. Great idea putting all your eggs from one basket into another, not to mention that growing food just to burn it is retarded. Then you’ve also got retarded legislation from the federal government like NAFTA which makes it easier for manufacturers to source their labor elsewhere, since the big 3 let the UAW make ridiculous demands.
  
  I don’t know how people live in Detroit. Property taxes are insane in the city. I’m not sure if this is true or not but I’ve heard that crime has actually gone down since so many people are leaving the city. If it has, it’s certainly no thanks to the police, who only protect and serve themselves,
  
  On the subject of capitalism, Detroit is a perfect example of how our economic system is NOT capitalist. It’s a perverted mix of private and public entities that most closely resembles mercantilism, if anything. Alexander Hamilton would be proud.
  
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27. johnnycanuck140 days ago
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  And… if the season ended today the Red Wings would be out. Might as well close the place down in that case.
  
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28. Borat140 days ago
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  Lefty, the reason tech and bio can’t enter Detroit, Cleveland ’cause of union clauses in cities bi-laws. To turn on a bulb you must hire union guy. The only city which survives this insanity at the moment NY. And honestly I don’t know how. 20 years ago it was a mess (govern by a democratic mayor). It prospered only under Rudy and doing well under Bloomberg who rode into city hall on republican pony in practically socialist opinionated town. Somehow even commies know what’s good for them
  
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29. howsmydriving140 days ago
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  lovinGMyChevy: yet another genius adds his voice to this forum.
  
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30. rarson140 days ago
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  Guiliani didn’t to **** for NYC, other than yell at constituents that asked questions he didn’t like at town hall meetings and kill a bunch of people on September 11th thanks to his poor planning. Besides, if you’re playing the Democrat/Republican game, he’s as Democrat (and as fascist) as Republicans come (he actually switched parties because he knew Republican voters outnumber Democrats),
  
  Bloomberg is another asswipe of a slightly different color. I feel sorry for the residents of NYC, although I guess it IS their fault for continuing to vote for crap people.
  
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31. DB9140 days ago
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  In all fairness I think your story should have included what Rattner actually said, especially the part about current estimates of the loss to taxpayers now estimated at 5-10 Billion not the 20-30 of last September. If GM keeps going the way they’re going the odds are that total cost to taxpayers for GM’s bailout will be zero to even a profit.
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  “Rattner said the government’s $50 billion investment in GM is now worth $40 billion to $45 billion– a vast improvement over prior estimates that suggested the government would lose $20 billion on its bailout of the Detroit automaker.
  
  Rattner based his revised estimate on GM’s better-than-expected performance and the higher value of assets remaining in the old GM.
  
  Some Wall Street analysts also have upped their estimate of what GM will be worth when it holds an initial public stock offering this year or next.
  
  The new GM has a much stronger balance sheet with lower fixed costs.
  
  The Treasury Department swapped about $42 billion of its $50 billion investment for a 61 percent equity in the company. GM has vowed to repay the remainder of its $6.7 billion in government loans by June. It also holds $2.1 billion in preferred stock.”
  
  http://www.detnews.com/article/20100310/AUTO01/3100435/Former-car-czar-says-auto-bailouts-saved-Michigan
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  If at the time they had let GM go under the resulting loss to the taxpayers would have be in the $100′s of Billions if not Trillions of dollars. Washington is the guarantor of last resort for any and/or all of the States. The people that scream about the bailouts on this site have yet to counter an effective alternative – it’s equivalent to schoolyard banter – a lot of noise signifying nothing;-)
  
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32. lovinGMyChevy139 days ago
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  Well I still agree with what I said, and there’s really a lot more oil on this planet than you think. And no I’m not playing the Democrat/Republican game. I was playing the “I’m not a big environmentalist fan” card.
  
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33. rarson139 days ago
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  “If at the time they had let GM go under the resulting loss to the taxpayers would have be in the $100’s of Billions if not Trillions of dollars. Washington is the guarantor of last resort for any and/or all of the States.”
  
  What? It was never designed to be any such thing. Besides, where the hell do you think all this money comes from? The government has turned our currency into a form of debt.
  
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34. Breakaway139 days ago
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  Some people should stick to talking about cars. Too many clueless statements. Number one idiot who is not informed by credible sources is lovinGMyChevy
  
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35. gray_cobra139 days ago
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  die union scum, die! we should all have to work 120hr work weeks for 5 bucks an hour. who needs health care or retirement. im sure big business could be trusted to police themselves and take of its workers. how dare the unions think they deserve to make a decent wage. how dare them want to be treated humanly. how dare the unions bring everyone a 40hr work week, health care, retirement, humane treatment, social security, time and a half, a lunch break, and on and on. i think we should all kill at least 2 union men a day, make that 3, the extra man could be worked in on our lunch break that the unions forced upon us.
  
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36. rarson139 days ago
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  “we should all have to work 120hr work weeks for 5 bucks an hour. who needs health care or retirement.”
  
  You realize that union demands drive up the price of goods, which in turn drives up your cost of living, right? It’s like saying “Let’s force everyone to pay a minimum wage of $8/hr. Now let’s make 25¢ loaves of bread… oh wait, that’s not possible.
  
  Talk about corporations all you want, it’s the legislation that creates barriers to entry that secure their place in the market and eliminate competition, allowing them to cut costs while jacking up prices. Just try starting a new radio station with all the FCC regulation in place. Why do you suppose it’s so expensive? Because the FCC grandfathered in the old stalwarts and made it nearly impossible for decent competition to enter.
  
  Unions are a bandaid and a kludge that doesn’t even come close to addressing the actual problem, which is selective government regulation that caters to large companies with lots of money. You say big businesses can’t be trusted to police themselves… but they wouldn’t be policing themselves without government regulation, they’d be policed by private regulators, regulators who would actually have to DO THEIR JOBS to stay in business, unlike the government (the NHTSA’s ongoing failures are a perfect example, as are the FDA, DEA, TSA, etc.)
  
  High wages wouldn’t be necessary if the Federal Reserve wasn’t controlling the currency and maintaining a constant rate of inflation. When currency inflates, all the money you’ve saved up becomes worth less, as does any debt you accrued. So when the policy is constant inflation, why the hell would anyone invest in currency? That’s probably why the federal government doesn’t bother to balance its budget. Print more money, inflate the currency, and debt goes down.
  
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37. lovinGMyChevy138 days ago
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  Breakaway- You’re just too scared to hear new concepts.
  
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38. TornadoGTI138 days ago
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  If anyone is looking to blame someone for Detroit/Michigan’s woes it is Michigan and the Auto Industry itself. Michigan became SO dependent on it’s manufacturing base that now that manufacturing is taking a huge hit, so is Michigan. I have lived in the Detroit area half my life and the Grand Rapids area the other half. Detroit has cars and suppliers and Grand Rapids has furniture and manufacturing. Now that both are rocked, Michigan doesn’t know what to do. This is Michigans’ fault for not diversifying their industry base to include technology or durable goods or anything.
  Then, the Big 3 can be blamed for ALL of their own problems which lead to the problems Michigan is having. Unfortunately this is a prime example of why unions fail. I heard of people who were getting paid $20+/hour to work at a stamping plant or an axle plant or a transmission plant. Doing work that is worth $12/hour at best. They could afford to do this when Ford, GM, and Chrysler WERE the Big 3 but now that Chrysler is WAY down the list, Ford is MAYBE 4, and GM struggles to be 2 or 3. (Behind Toyota and VW in the global market), they cannot sustain.
  
  What is interesting about all of this is that all the union guys that don’t have jobs blame it on me buying a VW and me, who actually has a job and one that is not tied to the auto industry at all (in finance) believes that the Big 3 didn’t make competitive cars and were paying their employees way to much to do a job a 15 year old Mexican could do and would do for $5/hour and love life. They actually expect me to buy an inferior product to save their job. I am not dropping $30k+ on MY car so YOU can keep your job getting paid 2x what you should to build a product that is 1/2 as good…
  
  Growing up here I always believed that working for the “Big 3″ was a good thing, no, a great thing. I had friends parents who had 2 houses, a boat, 2 new cars every single year and had the perception of well being. They all did this because “Its Ford,GM,Chrysler, they are the Big 3 and I will always have a job because of this.” Now, those friends parents are living in 1 and 2 bedroom apartments with 1 car for husband and wife to share. They counted on their pensions and corporate auto plans to take care of them. They would spend 90% of their paychecks knowing they have a HUGE pension and could get new cars for 50% of MSRP. These people and the unions and the American auto industry completely represent what is wrong with America. The amount that they relied on their great companies to provide for them was no different then a single mom with 2 kids relying on WIC and government assistant programs. (Now GM is one big government assistance program)
  
  Unfortunately, these people relied so much on this type of work that they never thought it necessary to gain other skills. Right out of high school they could go make $15-$20 an hour and work 40-60 hours per work. At 18, with just a diploma (at best) making $35k a year is amazing. Now, at 40, you are making $50k a year and have not one employable skill other then the one you gained working 22 years making axles.
  
  This all just supports my thoughts that “THEY DID THIS TO THEMSELVES”. It isn’t Toyota’s fault that Ford makes/made (they are better every day) inferior cars. They rested on their laurels and failed. This is like the Tortoise and the Hare. The Hare being Ford and the Tortoise being Toyota/Honda/VW.
  
  They WILL rebound, not to a point of their future glory (bubble) but to a point of sustainability. This whole PROCESS is forcing the Big 3 to completely reconsider their place in the automotive marketplace. I mean compare a 2010 Cadillac CTS to a 2000 Cadillac Catera. HUGE improvement in competitiveness. Or the 2010 Ford Taurus to a 2000 Ford Taurus. Same thing. This is a good thing and good things will come out of this.
  
  Competition is what makes capitalism work. Without even the perception that competition is there, you fail. You will always be first AND last place without a competitor. It fosters complacency. That is what Ford, GM, and Chrysler were…complacent. Toyota and VW and Honda and X did not take advantage of this. While you were worried about staying on top, they were worried about getting on top. It is FAR easier to maintain then it is to work and grow. The growth and drive and push that Ford experienced from 1990 to 2000 or from 2000 to 2010 was nothing compared to the leaps and bounds that virtually ALL other companies did in those same time periods. To think that Ford has been making cars for 100 years and Toyota for 40 years is INSANE. Maybe in 60 years, Toyota will falter too. More then they are now.
  
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39. lovinGMyChevy138 days ago
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  Well it took me awhile to read, but nice nice info there. I do agree that what you said was right and everything. But I still have to say GM and Chrysler have had a lot of trouble because of gas prices that were influenced by environmentalists. Sure, GMs cars have been worse on gas than Toyota. But that didn’t matter when gas was < $2.00. Don't get me wrong; I agree with ya though.
  
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40. lovinGMyChevy138 days ago
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  TornadoGTI – I do agree with what you said. But I still think none of this would have happened if it weren’t for environmentalist influenced gas prices. Sorry. Don’t get me wrong, I still think you’re right and all. I just believe environmentalists really did cause the gas prices to jump. Democrats paid them for new information of saving this world, and at the same time taxed out gas a ton. All because they were convinced that we were going to blow up the world. And ya, I don’t mean to offend toyota, by saying they were too good. thank you
  
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41. rarson138 days ago
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  TornadoGTI, I agree completely. The only thing Michigan really has going for it right now is Dow Chemical and Hemlock Semiconductor (which Dow owns a chunk of). If it weren’t for them, Michigan would be in even worse shape.
  
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42. TornadoGTI137 days ago
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  @ lovinGMyChevy – I think the gas prices effected ALL of the automakers equally. They all sold cars, trucks, suvs, vans, etc. When the price of gas rose, the sale of vehicles with poor fuel economy dropped. It just so happened that the Big 3 had worse vehicles as far as fuel consumption goes. Again, that was their problem/fault. It wasn’t like anyone went to Toyota or Honda or X and said “Hey, if you make more fuel efficient cars, we will raise the price of has.” That impact effected auto sales in general. The Ford F-150 is STILL the number one sold vehicle TODAY… Even ahead of the Camry. This was sourced from my current (4/10) issue of Motor Trend.
  
  @ Rarson – Dow Chemical is a VERY small part of Michigan’s overall economy. It is headquartered in Midland Michigan and outside of a 30 miles radius is virtually unknown to the majority of Michiganders. It is a company that does help diversify the state but it is still too small. Pfizer had a lot of commercial space in Michigan too and they had issues and left. Leaving a big hole in Ann Arbor. There is a lot of this.
  
  Heck, even VW/Audi of America was headquartered in Auburn Hills MI (25 miles N of Detroit, same city as Chrysler HQ) up until about 2 years ago when they moved to Herndon VA, just west of DC.
  
  I cannot blame them for leaving. Me and my wife are looking to move to NC within the next 6 months due to the job market for her as a teacher.
  
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43. lovinGMyChevy137 days ago
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  Okay…. I never even said that I assumed that Environmentalists did this PURPOSELY. I know they didn’t mean to. And yes, I know it was Big 3′s fault as well. But if Environmentalists would have never made an issue about our planet being at stake, none of this would have happened.
  
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44. rarson136 days ago
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  @TornadoGTI
  
  Oh, I know. Dow HAS been pumping a lot of money into the economy but you’re right, it’s a small chunk. I was mostly thinking of Saginaw when I mentioned Dow. Saginaw would be dead without Dow. The shops in Michigan that I worked with (in Grayling, Houghton Lake, and Gladwin) almost exclusively relied on Dow orders to keep their businesses operating (they were ASME pressure vessel fabricators).
  
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