Obama's SOTU Address — Page 2

Thank you for your answer AMH. I agree a Detroit collapse would have been catastrophic. I think we would have seen multiple other collapses (of suppliers and support industries) immediately after. I lived in Rockford when Chrysler (a major employer thre) had its problems under Carter and Reagan and I can tell you- when an auto plant shuts down everyone suffers. And this would have sent a ripple nationwide- dealerships, repair centers, parts manufacturers- as well as a huge influx of unemployed workers. I don't know what our economy would be like now but I do not see how it could have been any better than it is now.

I can tell you who would have loved it: Wealthiest Americans. Economic depressions keep wages low (good) and gives them lots of opportunities to "Bain" an industry (Purchase the components of a dead business and sell them off at a profit). People at the other end of the income spectrum would have suffered.

Updated On: 1/25/12 at 02:44 PM

^ Brilliant.

The bailouts were nothing more than loans to the auto industry to give itself a chance to restructure. Unions made concessions in order to keep plants running. The US recovered most of what it loaned to Chrysler and GM. Estimates of the out of pocket loss from the auto bailout for the US Government is approximately 14 Billion.

The downstream economic consequence of both Chrysler and GM failing at the same time would have been as many says, catastrophic. Not only in the immediate manufacturing readiness of the US (I firmly believe critical infrastructure and manufacturing should not be foreign owned, and there was a real risk of these companies being bought by foreign entities in a fire sale), but the impact downstream on suppliers of parts and services would be similarly horrific, increasing unemployment and those seeking unemployment benefits. It is estimated that every auto job creates 10 jobs downstream.

It also would have impacted Ford in terms of suppliers going out of business, parts not being readily available, and possibly taking Ford (who did not need a bailout) down with the other two auto manufacturers.

One thing I do not criticize Bush for is bailing out the auto industry. It is a critical manufacturing base that I believe has national security interests in being maintained and US owned. I also think had he not done this (and had Obama not gone along and followed through), we would have gone through a much deeper economic downturn.

Here is a discussion of the issue from someone familiar with the auto industry.


Still Slamming the Bailout