Road to recovery
A Republican mantra — most recently recited by Indiana Gov. Mitch Daniels in his response to President Barack Obama’s State of the Union address Tuesday — holds that Obama “borrowed and blew” millions of dollars for failed bailouts and economic stimulus efforts.
Tell that to the folks at GM.
Two years after emerging from a government-backed bankruptcy that prevented the company’s collapse, the Detroit-based automaker last week reported selling 9.03 million vehicles worldwide in 2011, making it No. 1 in global vehicle sales, according to Bloomberg News.
Those GM sales generated approximately $8.1 million in profits, according to Bloomberg. That contrasts to the $ 38.7 million General Motors Corp. lost in 2007, an unsustainable business model that spurred the federal government to intervene in an effort to prevent the collapse of one of America’s most significant manufacturing sectors.
The GM success story — and a similar saga at Chrysler — illustrates how government should react to a key national business in crisis. It also provides a shining example of how government, business and labor leaders can work together to save an industry.
Rather than letting the market take its course, as advocated by anti-government adherents to the cult of capitalism, by allowing two of the “ Big Three” carmakers to fail — in the process driving hundreds of thousands of American workers from assembly lines to unemployment lines — the federal government intervened.
After GM filed for Chapter 11 bankruptcy in 2009, federal officials buttressed the company financially through its reorganization process, minimizing job loss while firmly forcing management to adopt a viable 21st century business model.
Meanwhile, unions made concessions on wages and benefits, as well as working conditions that allowed the company to modernize and realign its focus to emphasize quality control and customer service.
GM now employs 202,000 workers, according to its website. The company continues to add workers.
It can do so because the Obama administration intervened, taking swift and appropriate action to prevent a corporate suicide that would have closed plants, set back the U.S. manufacturing base even further and caused widespread pain for middle class workers and their families.
Republican presidential candidates and political rhetoricians label it a bailout, but the Obama administration’s reaction to the 2009 U.S. auto industry crisis protected a delicate and precious commodity: jobs.
Defunct companies don’t create jobs.
The $23.6 billion that Obama “blew” on the auto industry “bailout” equates to what the U.S. spends in two months on combat operations in Afghanistan and Iraq. With that context, a “bailout” that benefits 202,000 American workers seems to be an eminently worthwhile investment.
The GM lesson is that, while government might not be able to create private sector jobs, it certainly can save them. As in most things, thoughtful collaboration yields the best results.
Conversely, blind faith in the private sector won’t produce what this country needs most — jobs — and, in fact, could cost us jobs in the name of protecting investors.