There are arguably four bases upon which a General Motors bailout may have been justified. They are:
1. High product quality,
2. Improvement of product quality,
3. Protection of jobs, or
4. Minimal harm to others.
Product Quality
A brief look, possibly even a glance, at the quality of General Motors' vehicles suffices to show that it falls short, or very short, of justifying an interference in the markets by a governmental unit. GM's overall 2009 Auto Reliability GPA for vehicles from the model years 2005, 2006, 2007, and 2008 is 1.43, a D by letter grade. This places GM's overall reliability below all of the following for the same model years:
Honda Motor Company with a GPA of 3.56 and an Auto Reliability Grade of A
Toyota Motor Corporation with 3.46, a B
Fuji Heavy Industries Ltd. 's Subaru division with 2.98, B
Hyundai Motor Company with 2.77, a B
Mazda Motor Corporation with 2.69, a B
Mitsubishi Motors Corporation with 2.67, a B
Nissan Motor Company with 2.51, a B
Suzuki Motor Corporation with 2.22, a C
Ford Motor Company with 2.18, a C
Kia Motors Corporation with 2.14, a C
BMW AG with 2.05, a C
Daimler AG with 1.70, a C
Volkswagen AG with a 1.56, a C
Jaguar Cars Ltd. With a 1.50, a C.
Improvement of Product Quality
An examination of General Motors' reliability standing in 1988 versus its standing in 2009 also indicates an absence of justification for a governmental intervention in the market. When 1988 and 2009 manufacturer lists are limited to those automobile companies offering the requisite data for both years, we have the following standings:
1988
1. Toyota
2. Mazda
3. Honda
4. Nissan
5. Daimler
6. BMW
7. Mitsubishi
8. Fuji
9. General Motors
10. Volkswagen
11. Ford
12. Chrysler
2009
1. Honda
2. Toyota
3. Fuji
4. Mazda
5. Mitsubishi
6. Nissan
7. Ford
8. BMW
9. Daimler
10. Volkswagen
11. General Motors
12. Chrysler
From the lists it may be seen that General Motors collapsed from ninth place in 1988 to eleventh place (second place from the bottom) in 2009, a decline in reliability standing, not an improvement.
(The 1988 list is based on the Auto Reliability Percentrank; the 2009 list is based on the 2009 Auto Reliability GPA for model years 2005-2008.)
Protection of Jobs
A complete liquidation of General Motors would have likely meant a de minimis net loss of jobs, for several reasons. First, General Motors' share of the US new car market had dwindled to 22% by 2008, and its unit sales were a meager 2.9 million. Second, from 2006 to 2008, US new car sales had declined by 3.3 million, leaving a 2008 excess production capacity exceeding all of GM's 2008 sales. Third, Ford Motor Company's unit sales had declined 0.8 million from 2006 to 2008 on a 2 percentage point drop in its US new car market share. This, coupled with a loss of 5 percent points in its market share from 2002 to 2006, left Ford alone with an excess production capacity sufficient to have filled much, if not the bulk, of any lost production capacity caused by a GM liquidation. In short, rehires and new hires by Ford may have covered most of the job losses occurred by a GM liquidation.
Minimal Harm to Others
The data suggest that the harm caused by a GM bailout was not minimal, but arguably egregious.
The immediate victim of the bailout was Ford Motor Company – its executives, its employees, and its shareholders.
Ford suffered two ways. First, bailing out GM meant that the bulk of Ford employees laid off in the 2000s were not rehired. Second, the bailout of GM served to punish Ford for its nearly two decades of quality improvement and to reward GM for doing so little to improve quality that whatever improvement, if any, it may have done failed to raise its reliability standing (it fell as noted above) or reduce its share of Consumer Reports' worst cars, save for the meager drop from 43% of CR's worst in 1992 to 41% in 2010.
Although Ford may be the immediate victim of GM's bailout, the most injured may prove to be the naïve or ill-informed US consumer. This is help made evident by contrasting GM's current reliability with that of Ford.
GM's 2010 Auto Reliability GPA for the most recent model years – 2006 to 2009 – is 1.25 versus Ford's 2.21, so on average Ford vehicles have fewer, or far fewer, reported serious problems. Fordmoremore, Ford has three cars that have excellent reliability for these model years. They are:
The front-wheel-drive Lincoln MKZ, Zephyr with a Reliability GPA of 4.00,
The 4-cylinder Mercury Milan with a GPA of 4.00,
The V6, 4-wheel-drive Ford Fusion with a GPA of 3.75.
By contrast, there is no GM-engineered vehicle with a 3-or-more-year data history for model years 2006 to 2009 that has a 2010 GPA above 2.25 .
And as noted above, Ford Motor Company, by reason of its loss in new car market share in the 2000s, had the greatest capacity to fill an increased demand prompted by a GM demise. Consequently, the Bush-Obama intervening bailout that preceded the liquidation of General Motors may have both imposed low quality products on the US new car market and limited sales of higher quality products.
In summary, there appears to have been little justification for the 2008-to-2009 US funded bailout of General Motors Corporation. However, it may be argued that Ford Motor Company employees who had lost their jobs prior to 2008 were likely mentally and emotionally adjusted to the improbability of returning to work at Ford by the end of 2008, while a liquidation of GM would have caused an immediate psychological distress, among those whose livelihoods were linked rather exclusively to GM, that would have exceeded the aggregate benefit – financial and emotional – from re-employing past Ford employees and the aggregate long-term harm to the US consumer and the US economy. While it may be difficult to assess the merits of the argument, the argument is reasonably strong enough to make the characterization of the government bailout as an act of idiocy or stupidity inaccurate. The bailout decision may or may not, have been unwisely, but it seems safe to say that it was either idiotic nor stupid.