Bailouts: Tragedy in Factories

Have you noticed how numbers no longer hold any meaning? $500 Billion or $1 Trillion or $150 Trillion. I admit these numbers are so large that even as an economist it is difficult to grasp.

So let’s look at the Detroit bailout in a different way: How many FACTORIES could have been built. VW recently built a new production facility in Tennessee. This plant is pretty typical. It cost about $1 billion to build and can produce 150,000 vehicles each year. Using these numbers:

  • The $80 Billion loaned to GM could have built 80 brand new production facilities capable of producing 12 million cars per year (GM produced fewer than 4 million vehicles in U.S. in 2010) Total North American production in 2010 about 12 million.
  • The 14 billion loaned to Chrysler would have added another 2 million vehicles.
  • Just the LOSSES (not the loan amounts) were $2o billion between Chysler and GM ($14 Billion GM, $6 Billion Chrysler) would have allowed for 20 brand new production facilities to be built capable of producing 3 million vehicles.

So when President Obama cheers the success of the Auto bailout— I just have to laugh and try not to cry. Just the losses were enough to build plants capable of producing one quarter of all vehicles produced in all of North America. This is not a success story–it is a tragedy.