Bush defends GM, Chrysler loans
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Former President George W. Bush answers questions from 2011 NADA Chairman Stephen W. Wade during the general session at the NADA Convention and Expo in Las Vegas on Monday. Photo credit: NADA |
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LAS VEGAS -- Former President George W. Bush on Monday defended approving the bridge loans that kept General Motors and Chrysler Group alive during the 2008 U.S. financial crisis and collapse in auto sales.
Bush, the closing speaker at the National Automobile Dealers Association convention, told dealers that he relied on the advice of Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, who told him that failure to act could lead to a full-fledged depression.
The loans, approved in the closing weeks of Bush's presidency, eventually allowed GM and Chrysler to undergo more thorough restructurings overseen by the Obama administration.
Bush said he still believes that "if you make a bad decision in business, you ought to pay," but "sometimes circumstances get in the way of philosophy."
He didn't want to gamble on the chance of a depression and 21 percent unemployment.
"I'd make the same decision again if I had to," Bush, 65, told Stephen Wade, the dealers association's outgoing chairman.
The Bush administration provided loans to GM and Chrysler starting with $4 billion to each company in December 2008 and January 2009.
Bush eventually provided $17.4 billion in aid to the automakers before the Obama administration expanded the rescue of the companies to $62 billion.
Election year issue
Obama has cited the assistance given to the auto industry as an example of policy that protected U.S. jobs.
Republican presidential candidates including Mitt Romney have criticized the moves by Bush and Obama as bailouts that interfered with private markets and contributed to the national deficit.
The U.S. Treasury still owns 26.5 percent of GM, and is expected to take a loss on the bailout based on the automaker's current share price. GM went public in 2010 at $33 a share, but the stock price remains below that level.
GM, which emerged from bankruptcy as General Motors Co., has since regained leadership in global auto sales, while Chrysler, which became Chrysler Group LLC, last year made its first profit since emerging from bankruptcy with the backing of Italian automaker Fiat SpA.
Both companies are benefiting from a rebound in overall U.S. light vehicle sales and lower operating costs.
GM, Chrysler and other automakers are increasing production at car plants after U.S. light-vehicle sales rose by at least 10 percent for two straight years for the first time since 1984.
The momentum for added production is expected to continue this year as U.S. auto deliveries may rise to 13.6 million, the average estimate of 18 analysts surveyed by Bloomberg.
U.S. light-vehicle sales rose 11 percent in 2010 and 10 percent last year after falling to a 27-year low of 10.4 million in 2009.
Bloomberg contributed to this report
You can reach Amy Wilson at awilson@crain.com.
