This past Sunday marked the third anniversary of Chrysler's exit from bankruptcy, and next month will mark the same milestone for General Motors. At the time there were many observers who thought that one or perhaps both companies would fail, including Senator John McCain who in late 2009 said "anybody believes that Chrysler is going to survive, I'd like to meet them."
The skeptics were wrong. We have now had 27 straight months of private sector job growth, and one of the strongest areas of our economy has been the auto industry. Since June of 2009 when GM and Chrysler exited bankruptcy, the auto sector has created more than 231,000 new jobs. Yet we are seeing a concerted effort on the part of the Republican Party to discredit one of President Obama's greatest economic success stories in order to harm his chances at being reelected.
Mitt Romney has made questioning the successful intervention in the auto industry a centerpiece of his campaign. After writing an opinion piece in the New York Times in 2008 titled "Let Detroit Go Bankrupt," he has repeatedly claimed that the government should not have invested taxpayer dollars in GM and Chrysler.
Last week, Republicans in Congress began to echo that message by holding a Financial Services Committee hearing titled "Investor Protection: The Need to Protect Investors from the Government" to debate whether or not the bipartisan effort undertaken by the Bush and Obama Administrations to help GM and Chrysler restructure was the right thing to do. During this hearing they advanced three arguments why the auto rescue was harmful to private investors.
First, they argued that private investors and not the government should have been given the opportunity to purchase the assets of GM and Chrysler and fund their bankruptcy restructuring. While in theory that may be true, the reality is that in early 2009 at the height of the financial crisis there was simply no private financing available to fund the bankruptcies of these two companies. There were extensive efforts made to market these companies and any interested party could have submitted an offer to the bankruptcy court, but no buyers came forward.
Second, they claimed that the workers received a bailout. Nothing could be further from the truth and this argument only exposes their reflexive, anti-worker agenda. Workers sacrificed billions of dollars in pension and health care benefits, accepted a 50 percent pay cut for newly hired employees and thousands lost their jobs because of plant closures.
Finally, they claim that money used to settle claims with the UAW -- which transferred responsibility for retiree health care and pension costs going forward to a new entity run by the union -- should have instead gone to investors. The fact is that investors received far more through the government managed bankruptcy process than they would have received had the companies been liquidated. In the case of Chrysler, the company's debt was trading at about 30 cents on the dollar prior to bankruptcy -- which is about what the creditors recovered -- and 90 percent of Chrysler's creditors agreed to the bankruptcy sale. Giving the investors anything beyond what they would have recovered through liquidation would have been a taxpayer-funded bailout to investors, many of whom purchased their investments for pennies on the dollar.
Three years after this amazing turnaround, the effort to discredit one of the greatest economic success stories of the last decade shows just how out of touch the Republicans are. The bipartisan effort not only ensured the survival of two of America's greatest companies, saved hundreds of thousands of jobs, but avoided a nightmare scenario where the entire manufacturing base of our country would have been threatened the recession would have been much deeper and longer.