Rattner: Auto Bailout Saved City of Detroit, State of Michigan from Bankruptcy

According to former “car czar” Steve Rattner, if the federal government hadn’t bailed out both General Motors and Chrysler, the city of Detroit and the state of Michigan would have been forced into bankruptcy.

Rattner made his comments at a recent bankruptcy conference in New York, telling the audience that Detroit “almost certainly would have gone bankrupt. The state of Michigan would have declared bankruptcy.”

Although pundits can argue the accuracy of his statements (or if a bailout was even needed to restructure the companies), it’s hard to argue that Michigan’s economy — which is closely tied to the automakers and their supply base — wouldn’t have taken a hard hit if the federal government hadn’t stepped in.

Interestingly, Rattner suggests the investment may be paying off. Having invested nearly $50 billion on GM alone, the government, according to some critics, would stand to lose at least $20 billion on the deal. Rattner says the investment is now worth close to $40 to $45 billion, an improvement over those original estimates. GM also aims to repay its remaining $6.7 billion in outstanding loans by June.

Rattner defends the government’s decision to intervene based on the number of jobs saved, noting hundreds of thousands of jobs were saved by the move. As Michigan still has one of the nation’s highest unemployment rates, the shuttering of two Detroit automakers — even temporarily — would have been a devastating blow to the state.

Source: The Detroit News