St. LOUIS -- The following editorial appeared in the St. Louis Post-Dispatch on Tuesday:
General Motors has reclaimed a title that three years ago many auto analysts thought was gone forever: GM again is the world's biggest automaker, having sold slightly more than 9 million vehicles around the world in 2011.
True, it's No. 1 with an asterisk: Toyota, its chief competitor, endured an earthquake and tsunamis in Japan that played havoc with its supply chain and production schedules, even as it was recovering from its recall problems of 2009-2010. Indeed, Volkswagen, which sold 8,156,000 vehicles last year, passed Toyota for the No. 2 slot.
Still, GM's comeback ranks somewhere between those of Lazarus and the 2011 St. Louis Cardinals. It shows what a smart, engaged national industrial policy can do: Identify industries that are essential to the economy, craft policies to help them, invest strategically in their makeover and then get out of the way.
Back in December 2008, ancient times when Democrats and Republicans sometimes cooperated with each other, President George W. Bush agreed to the industry's plea for bailout help, recommending that the government take $17.4 billion out of the new $700 billion TARP funding and lend it to General Motors and Chrysler.
Two months later, the new president, Barack Obama, took another $7.5 billion out of TARP funds to bail out GM and Chrysler's financial arms.
Mr. Obama's "car czar," Steven Rattner, a Wall Street investment banker, rejected GM's reorganization plan and ousted its CEO, Rick Wagoner. He was replaced on an interim basis by Ed Whitacre, who had built Southwestern Bell into the behemoth of the telecom industry.
When GM's creditors refused the government's plan, the government forced it into bankruptcy court. When GM emerged as a new company, it had shed its Saturn, Hummer and Pontiac lines. The government owned 61 percent of the new company, including successful brands like Cadillac, Chevrolet and GMC.
Faced with GM's possible collapse, the United Auto Workers agreed to concessions and profit-sharing. Plants were closed and labor costs were cut by two-thirds. In short, the government forced GM to undertake the drastic reorganization it had been unwilling to do itself.
"Government Motors," critics whined. Former Massachusetts Gov. Mitt Romney said GM should have faced the bankruptcy music without government help. Former House Speaker Newt Gingrich called the plan "irresponsible and dangerous."
But GM is profitable again. Under its new CEO, Daniel Akerson, a former private equity executive, the new GM is lean and decisive. Investors still are skittish; the stock is trading more than 25 percent under the initial $33 price at which the new company shares were priced. Taxpayers still own 26 percent of the shares, which might be depressing the price.
Still, even if the government sells at a loss, the cost of the auto bailout is expected to be no more than $14 billion; Chrysler already has repaid $5.9 billion, with interest.
The Congressional Budget Office had predicted the bailout would cost $40 billion. Had GM and Chrysler been allowed to fail, in the first two years alone it would have cost the government $28 billion in lost tax revenue and unemployment payments.
GM won't always be No. 1, but its comeback demonstrates that sometimes the role of government is to save capitalism from capitalists.
