CAR Study Tempers GM Auto Industry Bailout Rhetoric

By Matthew Askari | April 12, 2012
A new study out today from the Center for Automotive Research suggests there may be more than meets the eye in the story of the government bailout of auto industry giants GM and Chrysler. The study highlights just how much states and the federal government rely on tax revenue generated by the industry. Reading the news lately, you'd assume the bailouts were the worst government mistake since Dan Quayle misspelled "potato." The Chevy Volt has especially come under fire, with websites dedicated to making the Volt an official running mate, and Fox News being especially selective with its coverage of the electrified Chevy. Some conservative pundits have taken to labeling the Chevy plug-in hybrid the "official vehicle of the Obama administration," obviously meant as an insult. Of course, it's all nonsense; while the Volt came to market during Obama's tenure, the Volt concept debuted at the Detroit Auto Show in 2007, and the production version debuted on October 2008 at the Los Angeles Auto show, both well before Obama took office in January, 2009. But Volt disinformation is neither here nor there. Lost among the rhetoric have been a few unassailable truths. The auto industry was in poor shape in the mid-2000s and by 2008 GM and Chrysler were facing bankruptcy and certain ruin, largely on account of poor management. Ford had reported poor sales, but had raised enough money by leveraging its properties to avoid taking government funds.
As part of the agreement, GM and Chrysler arranged to shape up, shed unprofitable divisions, reduce the size of bulky and inefficient lineups, and focus on becoming more competitive with other global brands. And it's important to note that while the government doled out over 700 billion dollars in bank bailouts, about only 10 percent of that went to the auto industry. Now a few years after the initial bailout packages, GM, Ford and Chrysler are all coming off of profitable months, and even the Chevy Volt saw a 276 percent increase in sales in the month of March. While the overall economy is still wavering, the auto industry is rebounding, and that's especially true for domestic brands. What the pundits and naysayers may have overlooked, and what gets lost in the rhetoric, is just how much a growing auto industry benefits states and America as a whole. Which brings us back to the new CAR study, which says, "the automotive industry accounts for 13 percent of all state government tax revenues." In 2010, a staggering $91.5 billion (roughly the GDP of New Zealand) went to state governments in the form of tax revenues thanks to the automotive industry. At least $43 billion went to the federal government in 2010 alone (more than the sum of all bailout monies paid), and with a burgeoning auto industry, those numbers could rise. This study will likely fly over the heads of the impassioned pundits, but it gave us pause. If you're going to focus on one subject, at least occasionally opt for the wide-angle lens. Source: CAR