With sales and profits up at General Motors, proponents of the 2009 automotive bailout for GM (and Chrysler) now assert the taxpayer-financed rescue was a success. In a visit to Michigan in late January, U.S. president Barack Obama argued the deal saved jobs. Canadian politicians, including Finance Minister Jim Flaherty, who last summer incorrectly asserted taxpayers received all their money back, have made similar boasts.

Given the revisionist history in play, let’s place that 2009 deal in proper context.

It’s no surprise that GM and Chrysler are doing better. Relieve any company of its debt through bankruptcy and stuff it with taxpayer dollars and it would be remarkable if cash flow and profits did not dramatically improve. But corporate restructuring through bankruptcy regularly occurs. The relevant question, in this specific instance, is why were taxpayers also dragged into it?

The answer—jobs, as the politicians assert —is not convincing. In 2009, Canada-wide, 5,420 companies went bankrupt; I’m aware of only two rescued with tax dollars: GM and Chrysler (the latter for the second time in three decades).

It was a costly exercise. The federal and Ontario governments loaned $13.7 billion to the two companies in fiscal 2009/10. That was 38 per cent of the $36 billion in corporate income tax revenue collected by both governments that year.

It was an interesting gamble, risking four out of every ten corporate tax dollars to resuscitate two companies. Problematically, in a shrinking market for automobiles, jobs “saved” at one company are merely sacrificed at another. The bail-out did not increase demand for automobiles or any of the parts or materials needed to build them.

Some bailout cash has been returned to the public treasury. But taxpayers have still lost substantial amounts according to the federal Finance department.

After subtracting the partial repayment made by both companies, the government’s sale of some shares they obtained via the bailout, and the present value of GM stock still held by the two governments, taxpayers are still out $810 million on Chrysler bailout and $4.74 billion on the GM loan. That’s an estimated $5.5 billion loss, which will fluctuate only slightly depending on the final GM share price when governments relinquish their remaining shares.

On jobs, three years later, the current employee count in Canada is 10,000 at GM (down from 12,000 in early 2009) with Chrysler at 9,000 (down from 9,800 in 2009). Using present employee counts, that means taxpayers offered up a $90,000 subsidy per Chrysler employee and a $474,000 subsidy per GM employee. (The company-only estimates are fair calculations; in the absence of GM or Chrysler, jobs at auto parts manufacturers and dealerships would have been at least partly restored by either the two post-bankruptcy companies or by other automotive companies.)

Additional job losses at the two companies in 2009 would have been painful. However, put such numbers in the wider context: Across Canada in 2009, 259,000 full-time positions evaporated (with 129,000 of those in Ontario)

It would have been fiscally reckless and practically pointless to try and rescue every company and all employees in every province that year. Instead, laid-off employees have access to employment insurance, tuition breaks, student loans and retraining subsidies. Auto workers in the same predicament could have accessed these programs for a tiny fraction of the $5.5 billion bailout cost.

Recessions do end and people are re-hired: across Canada, total full-time employment is now 387,000 higher compared to December 2009. That includes 150,000 more full-time positions in Ontario and a whopping 171,000 more jobs in Alberta. 

Saskatchewan and Manitoba have 29,000 more full-time positions now than at the end of 2009; that’s 10,000 more than the present GM and Chrysler workforce combined. In other words, the two-company automotive bailout was expensive, counter-productive for GM and Chrysler’s competitors and taxpayers in general. It also ignored the wider economy.

One automotive journalist in favour of the bailout recently argued that such matters should be driven by “hardnosed business insight” and not ideology. I agree.  No prudent Canadian bank would have loaned GM and Chrysler billions of their depositors’ money back in 2009. That only occurred in the softer, political realm—with a $5.5 billion loss. Meanwhile, U.S. taxpayers are out $23.8-billion according to a recent U.S. Treasury Department report to Congress. 

For supporters of the bailout, their error was not only mathematical but conceptual: too many were romantic about particular corporations. But companies fall and new ones arise to take their place. The critical and useful role for government is to create the policy framework that helps ensure a vibrant economy, not to micro-manage layoffs at a particular corporation. 

Unless one cares to be protectionist, provincial—or ideological—the GM-Chrysler bailout made no sense in 2009 or now.