A Retrospective Look at Rescuing and Restructuring General Motors and Chrysler

Abstract

The rescue of the US automobile industry amid the 2008-2009 recession and financial crisis was a consequential, controversial, and difficult decision made at a fraught moment for the US economy. Both of us were involved in the decision process at the time, but since have moved back to academia. More than five years have passed since the bailout began, and it is timely to look back at this unusual episode of economic policymaking to consider what we got right, what we got wrong, and why. In this article, we describe the events that brought two of the largest industrial companies in the world to seek a bailout from the US government, the analysis that was used to evaluate the decision (including what the alternatives were and whether a rescue would even work), the steps that were taken to rescue and restructure General Motors and Chrysler, and the performance of the US auto industry since the bailout. We close with general lessons to be learned from the episode.