In September 2008, Congress approved a $25 billion loan program for Detroit’s Big Three. The money was offered to help U.S. automakers develop more fuel-efficient vehicles.
Three months later, representatives from Chrysler, General Motors and Ford returned to Washington. Though they had yet to receive the September largesse, they wanted an additional $25 billion to weather what they said would be a dark December. GM, the world’s largest automaker at the time, said it could run out of money by the end of the year.
Most congressional Democrats supported another $25 billion for the Big Three. The Bush administration and most Republicans on Capitol Hill opposed offering more loans.
“There’s no indication that the car companies would do anything different than what they’ve been doing, which has been a big failure, which is why they need the bailout. And there’s no reason to throw money at a problem that is not going to get solved,” then-Sen. Jon Kyle, R-Ariz., was reported to have said.
But there was a very good reason to loan the U.S. automakers money: massive unemployment that would’ve dragged down the U.S. and world economies.
Some 355,000 Americans at the time were directly employed by the auto industry, according to Senate staffers. Another 4.5 million Americans worked in related fields. One million former workers and their dependents drew their retirement and health care from the Big Three.
In the short term, the bailout kept about 2.6 million workers from losing their jobs in 2009, the Center for Automotive Research says.
And without it, parts suppliers would’ve failed, imperiling foreign automakers such as Honda and Toyota that have U.S. manufacturing plants. Car dealers would’ve folded. Defense contracts would’ve been broken. Job losses would’ve rippled through every sector of the economy.
That couldn’t be allowed to happen — particularly during a recession. And for the sake of the economy, President George W. Bush approved $17.4 billion of the financial markets rescue fund, known as TARP, for the U.S. automakers.
It was a bailout that was necessary.