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Obama: Auto bailout unpopular but right

April 24, 2010

Obama: Auto bailout unpopular but right

Detroit News Washington Bureau

Washington — President Barack Obama touted the progress that General Motors Co. and Chrysler Group LLC have made in defending the government’s $85 billion auto industry bailout.

In his weekly radio address today, the president defended his unpopular bailout after the automakers reported good news. GM repaid its $5.8 billion in U.S. and Canadian government loans, while Chrysler reported a first-quarter operating profit — but an overall loss.

"I knew this wasn’t a popular decision. But it was the right one," said Obama, who has previously called rescuing automakers the most unpopular decision of his presidency.

The White House noted in a report this week that 1.1 million or jobs could have been lost if the companies had been forced into liquidation.

Obama noted that just more than a year ago "our country faced a potentially devastating crisis in our auto industry."

"General Motors and Chrysler, two companies that for generations were a symbol of America’s manufacturing might, were on the brink of collapse," he said. "The rapid dissolution of these companies — followed by the certain failure of many auto parts makers, car dealers and other smaller businesses — would have dealt a crippling blow to our already suffering economy."

Obama said automakers were to blame for much of the woes.

"Many of the problems in the auto industry were a direct result of poor management decisions over decades," Obama said. "So it wasn’t an easy call. But we decided that while providing additional assistance was a risk, the far greater risk to families and communities across our country was to do nothing."

Obama suggested that new management was a requirement at both automakers.

"They had to fundamentally reorganize, with new management that would re-examine the decisions that led to this mess and chart a path toward viability," Obama said. "Many believed this was a fool’s errand. Many feared we would be throwing good money after bad, that taxpayers would lose most of their investment and that these companies would soon fail regardless."

He argued that the positive news from the two arguments is evidence that critics were wrong.

Obama said the auto industry is more stable today.

President George W. Bush agreed to save GM and Chrysler in the waning days of his presidency with a $17.4 billion bailout. He also agreed to bailouts of GMAC and Chrysler Financial before he left office.

Separately, the Treasury Department told Congress on Friday it had reduced its estimate of the costs of the auto bailout to $28 billion from $30 billion.

The White House has proposed collecting a fee from the nation’s 50 largest banks to pay for the taxpayer losses from financial and auto bailout. Some GOP members of Congress have questioned why banks should pay for the losses incurred by automakers.

But some in Congress have criticized the White House’s touting of GM’s repayment.

Sen. Charles Grassley, R-Iowa, called GM’s repayment a "money shuffle" — since the automaker used unused government bailout funds to make the repayment.

"The taxpayers are still on the hook, and whether TARP funds are ultimately recovered depends entirely on the government’s ability to sell GM stock in the future," Grassley said.

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