Bordonaro 1

Jack Bordonaro
Ms. Caruso
UWRT 1103
14 April 2016
Title
Many critics believe that the U.S. Government should have allowed General Motors
Corporation and Chrysler group LLC to fail to make the aftermath of the automotive industry
stronger. Critics have also pointed out the bailout issues with cronyism, meaning the
appointment of friends and associates to positions of authority, without proper regard to their
qualifications, and back room politics associated with the automotive bailout. Despite these valid
criticisms, I believe the U.S. Governments bailout of GM and Chrysler was the most
appropriate action given the impact to U.S. jobs and the economy. In the end according to
Retooling General Motors by Joseph Smolinsky, General Motors and Chrysler are back in
public hands, and beyond the need for taxpayer support. The GOP Republican Party argues that
President Obamas administration made a mistake and inflated President George W. Bushs $13.4
billion plan into an $80 billion fiasco. There are three separate naysayer groups whom opposed
the GM bailout. The first group felt that the U.S. Government would not be able to successfully
run the company. Of course the U.S. Government is not qualified to run an automotive
manufacturer, but that was never the governments intention; they were simply the investor and
of course the grantor of bankruptcy protection. The second group dislikes the fact that certain
special interest groups such as the United Auto Workers (UAW) Union had influence on the
government and received preferential treatment regarding generous union pension plans while
shareholders and creditors were more adversely affected (Pulliam 2). To a large degree, pensions

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are a fundamental part of the compensation structure of the average automotive assembly line
worker and they had to be preserved or many of the experienced workers might have
discontinued their employment. The UAW is largely aligned with the Democratic Party and I
discount this argument as pure partisan politics. The third group believes the government stepped
across constitutional boundaries (Ahle 6). While the Troubled Asset Relief Program (TARP) is
clear that this assistance was designated by Congress to go to financial institutions. The Obama
Administration loosely interpreted TARP as applying to any troubled company, and while this is
a dangerous precedent, in this crisis situation I support this interpretation (Smolinsky 13).
GM owns and represents brands such as Chevrolet, Pontiac, Buick, Cadillac, and recently
decommissioned Hummer. I chose to create a poster-like blueprint of the newly redesigned 2016
Chevrolet Camaro with labels on different specific parts of the car that show the effort required
to create and style this vehicle as a metaphor for the complexity and effort to create a multibillion-dollar company. General Motors has expended time, money, and effort since its
establishment in 1908 helping Americans have a car for every purse and purpose (Smolinsky
3) for the company to be thrown away like yesterdays news. This company is a strong
contributor to the American economy in supplying nearly one hundred thousand American jobs
that it would take generations to replenish if it were to close its doors (The Unpopular,
Successful Auto Bailout 4). Instead of highlighting features, the information on the poster about
the parts of the car refutes the criticism of the bailout and suggests the reasons why it was an
imperative action. My hope is that the billboard will catch peoples attention in dealerships and
factories as a new sports car but when they read the labels, the receive a new outlook about the
companies. Without General Motors and Chrysler, our U.S. economy would have suffered a
significant setback from which it would have taken generations to recover. If that is not a reason

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to cross constitutional boundaries, I dont know what would be. General Motors is responsible
for national icons like the Chevrolet Corvette, the Pontiac GTO, and the Cadillac Deville and
deserves to stay afloat for years to come and my informational blueprint highlights the major
reasons why in an easily understandable manor.
Sentimentality for classic cars was not what led the U.S. Treasury to form an
interpretation of the TARP Law that was favorable to the American economy. General Motors,
the second largest manufacturer in the world as of April 2009, employed three hundred thirtyfive thousand people worldwide (Sherk 2). The national average annual salary in 2015 for
assembly line workers is roughly thirty-four thousand dollars and when multiplied by the number
of GM employees, this alone would amount to eleven billion dollars in lost taxable income for
the U.S. Government (Assembly line Worker 1). In 2013, the federal government sold off the
final shares from its $49.5 billion bailout of GM with a $10.5 billion loss on the investment
(GM Bailout produced a Windfall for US Taxpayers). Based on GMs corporate taxes and the
income tax of its employees, analysis from the Center for Automotive Research found that if
GM and Chrysler had been allowed to fail the US treasury would have lost $105 billion in lost
income and payroll tax revenue. Joseph Smolinsky of Brooke Law captures this concept well by
saying that liquidation would have demanded a larger toll on taxpayers due to unemployment,
healthcare, and increased expenditures.
Even more broadly, the shutdown in auto manufacturers would have a significant impact
on the global economy. Yearly, General Motors purchases fifty billion dollars in outsourced parts
from third party manufacturers. If general motors ceased to purchase these parts, it would have a
detrimental trickle down effect on those third party companies where in the United States
singularly, ninety-one thousand workers would be relieved of service due to companies reliance

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on General Motors (Pope 2). In addition, GMs operations require substantial indirect services
that would crate further collateral economic damage.
These suppliers include a myriad of indirect suppliers (not Tier I part suppliers) such as
advertising agencies and financial consulting and other service providers that supported
GMs operations. Each of these suppliers hired employees dedicated to the automotive
industry. One quickly realizes the severe adverse impact that would occur to the U.S.
economy if GM were to shut down operations (Smolinsky 9)
Similarly, the failure of Chrysler Group would have negative economic effects. Chrysler Group
encompasses Jeep, Dodge, Chrysler, Ram, and Fiat brands and yet somehow still gets
overshadowed by the immensity of General Motors bailout. Moreover, Fiat, a successful Italian
automaker, acquired Chrysler which was ultimately equivalent to a bailout or a fire-sail
depending on how you look at it. Without GM and Chrysler our U.S. economy would significant
setbacks from which it would have taken years to recover. If that is not a reason to cross
constitutional boundaries, I cannot grasp something that would be of that caliber.
For those naysayers in the Grand Ole Party that said that the government would ruin
General Motors if it bailed the manufacturer out, the company is completely safe from
government tampering. This is because the United States took ahold of no assets owned by
General Motors even though they could have over the grounds of eminent domain and
nationalism (Smolinsky 6). According to Todd Zywicki of George Mason University,
Ultimately, the parties involved conducted the sales transactions at the center of the
restructurings with the utmost transparency and afforded all possible and available due processes
to affected parties (Zywicki 3). I am not sure where the idea of backroom politics or moral
hazard came into play, but General Motors and Chrysler Group are still and never were not

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publically owned and traded companies successfully operating without the oversight of any
government programs and will remain publicly traded companies headed into the foreseeable
future. Zywicki goes on to say that the U.S. Treasury operated this bailout exceptionally well and
carried out all procedures as if it were any other everyday fiscal policy. In other words, the
government had no intention of taking over the companies and was only concerned with their
public image and well-being. All three parties had the publics best interest at heart and my
blueprint mimics that. My print clearly exemplifies a solution to what the republican propaganda
said to put such a bad taste in the populations mouths and I intend to post it to multiple public
forums so others can easily realize what I have recently discovered.

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Original Works Cited

Ahle, Steven. How Much Did the GM Bailout Really Cost? DC Clothesline. 2015. Web. 29
Feb. 2016.
Assembly Line Worker, Automotive Salary (United States) United States Home Change
Country Dont See What You Are Looking for? Assembly Line Worker, Automotive
Salary. 2016. Web. 29 Feb. 2016.
Pope, Byron. GM Recall Crisis Creates Ripple Effect on Industry. GM Recall Crisis Creates
Ripple Effect on Industry. 1 July 2014. Web. 29 Feb. 2016.
The Price of the GM Recalls: Advice for Mary Barra Knowledge at Wharton. Knowledge,
Wharton The Price of the GM Recalls Advice for Mary Barra Comments. Web. 29 Feb.
2016.
The Unpopular, Successful Auto Bailout. The American Prospect. 2014. Web. 27 Feb.
2016.
Wallace, Gregory. Auto Bailout Still Largely Unpopular. CNNMoney. Cable News Network,
2016. Web. 29 Feb. 2016.
Why Are Automakers Recalling so Many Cars? Chicagotribune.com. 13 Jan. 2016. Web. 29
Feb. 2016.

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New Works Cited

"GM Bailout Produced a Windfall for U.S. Taxpayers." Daily Kos. Web. 12 Apr. 2016.

Hassett, Kevin A. "Obama's Auto-bailout Fiction." AEI. American Enterprise Institute, 3 Apr.
2012. Web. 04 Apr. 2016.
Pulliam, Mark. "Unconstitutional at Any Speed: Assessing the Legacy of Obama - Online
Library of Law & Liberty." Online Library of Law Liberty. 05 Nov. 2015. Web. 12 Apr.
2016.
Sherk, James, and Todd Zywicki. "Auto Bailout or UAW Bailout? Taxpayer Losses Came from
Subsidizing Union Compensation." The Heritage Foundation. 13 June 2012. Web. 04
Apr. 2016.
Smolinsky, Joseph H. "Retooling General Motors: Defending an Innovative Use the Bankruptcy
Code to Save America's Auto Industry." Practicum. Web. 4 Apr. 2016.
Zywicki, Todd. "Mercatus Center." Obama's United Auto Workers Bailout. George Mason
University, 14 June 2012. Web. 04 Apr. 2016.