STUDY: Each New GM Vehicle Costs Taxpayers $12,200

Illustration for article titled STUDY: Each New GM Vehicle Costs Taxpayers $12,200

A study by the obviously pro-government National Taxpayers Union claims each new GM vehicle costs the average taxpayer $12,200. Their bizarre assumptions and our analysis below.

GM has been given $52.9 billion in TARP/Federal loans and financing arm GMAC has been given $12.5 billion of which approximately 8.6 billion can be considered GM money. If total car sales reach 10.5 million in 2009 and 12.5 million for 2010 and GM has roughly equal market share next year as it did in 2008 then GM will sell roughly 5.06 million over the next two years. Add and divide and you end up with about $12,200.

Rather than point out that this money protects jobs and keeps American industry from faring worse than it already is, we'll just make a list of all NTU's assumptions used to come up with the $12,200 per car figure plus our own analysis of how many of their assumptions are full of crap:

  • GM will sell 5.06 million cars in 2009/2010 combined.
    (NTU's numbers on GM sales for 2010 are okay based on a SAAR of 10.5 million, the reality is they'll possibly do worse than the 2.31 million cars and instead do 2.25 million.)
  • GMAC will loan no money back to finance a car to anyone who is also a taxpayer
    (They will)
  • GM will have the same market share in 2010 it had in 2008
    (Almost certainly not. It'll probably be worse)
  • Total vehicle sales will reach 10.5 million in 2009
    (More like 10.7 million as of late October)
  • Total vehicle sales will reach 12.5 million in 2010
  • GM will not pay the $6.7 billion back
    (GM's already said it plans to start paying back the loans at the end of this year and even GM's not that PR-illiterate. We think.)
  • GM will never pay any loan back
    (See above.)
  • GMAC will never pay any loan back
    (GMAC has an unfair advantage according to the NTU study itself, therefore we assume it'll remain in business long enough to pay some portion of the loan back.)
  • GM will not sell any cars after 2010
    (OK, here's the real silly part of the study. We all know GM will more than likely still sell cars after 2010, even if they're cars we wish they wouldn't sell.)

So, to quote Pete Sepp of the NTU, "Every time someone in your neighborhood drives home in a shiny new Chevy Silverado, remember that it cost American taxpayers more than $12,200."*

*assuming everything above.

Study: Every GM Vehicle Sold Costs Taxpayers $12,200(Alexandria, VA) – The American taxpayer has put up $12,200 for every General Motors vehicle sold through the beginning of 2011, and $7,600 for every Chrysler vehicle sold as well, according to a new report issued by the 362,000-member National Taxpayers Union (NTU).
The report, The Auto Bailout – A Taxpayer Quagmire, authored by NTU Adjunct Scholar Thomas D. Hopkins, Professor of Economics at the University of Rochester, does the math on what the government bailout of the auto industry – including General Motors, Chrysler, and GMAC – actually means to American taxpayers, including how much each taxpayer has contributed to the auto industry since December 2008 and how much each vehicle is costing us.
"Every time someone in your neighborhood drives home in a shiny new Chevy Silverado, remember that it cost American taxpayers more than $12,000," said Pete Sepp, NTU Vice President for Policy and Communications. "I wonder if all those Americans without work right now could think of any better ways to spend that money."
The study found that the average American taxpaying family has invested roughly $800 in the auto bailouts so far. Moreover, the study found, the government support poured into General Motors, Chrysler, and GMAC – the financing subsidiary that supports sales at both – now stands at a towering $78.9 billion. Given that figure, and an estimate of how many vehicles GM and Chrysler will sell through the end of 2010, the study finds that each vehicle one of the bailed-out companies sells costs taxpayers $10,700.
Finally, breaking down the costs by company, the study reports that every Chrysler vehicle sold costs taxpayers $7,600, and every GM vehicle sold costs taxpayers $12,200.
The research is based upon a November study released by the Government Accountability Office (GAO), entitled Continued Stewardship Needed as Treasury Develops Strategies for Monitoring and Divesting Financial Interests in Chrysler and GM, " a follow-up report on the "Troubled Asset Relief Program," as well as statements and reports released from the U.S. Treasury.
Additional Findings Include:
• GMAC receives government guarantees not available to most private firms. Coincidentally, these are the same private firms that are forced to compete with GMAC taxpayer-assisted bank, Ally Bank. These guarantees save GMAC about $500 million annually in interest costs.
During the first ten months of 2009, GM and Chrysler sales fell further than other major auto producers, down 33.4 percent and 38.9 percent, respectively. 
While the prospect of repayment of GM and Chrysler loans might be expected, after bankruptcy the vast majority of the bailout funds are no longer legal obligations of the newly-structured GM and Chrysler.
If Americans are to believe public officials' claims that the government will eventually reprivatize the auto industry, the necessity of a thoughtful exit plan is essential. However, at this time no such plan exists, making it likely that the Treasury will not recover its investment.
"[T]he bailout has created moral hazard problems, inadvertently handicapping the progress of stronger, non-subsidized producers," Professor Hopkins concluded. "The problems extend beyond just the auto industry, as favored status for one financial company and its bank necessarily complicates prospects for non-subsidized rivals. The time has come to stop such bailouts, and in an orderly way, to seek at least some recovery for taxpayers."
Note: To view the complete issue brief, The Auto Bailout: A Taxpayer Quagmire, click here.

About the Author
Thomas D. Hopkins is Professor of Economics at Rochester Institute of Technology. He served as Dean of the College of Business 1998-2005 and as President, U.S. Business School in Prague, Czech Republic, an RIT MBA program where he taught 1992-98. He was the Arthur J. Gosnell Professor of Economics in RIT's College of Liberal Arts, 1988-98. Hopkins held senior management positions in two White House agencies during the Ford, Carter and Reagan Administrations; in 1979 President Carter appointed him a charter member of the federal government's Senior Executive Service. In the early 1980s, he served as Deputy Administrator, Office of Information & Regulatory Affairs, in the Office of Management & Budget. His research on business burdens of government regulation has been sponsored by the Organization for Economic Cooperation & Development (OECD) in Paris and the U.S. Small Business Administration (SBA) in Washington. He has testified on regulatory policy issues before committees of the U.S. Senate and House, and Canada's House of Commons. He co-authored a 2001 SBA report, "The Impact of Regulatory Costs on Small Firms," as well as National Research Council reports on marine transportation, the Exxon Valdez oil spill, and trucking/rail/barge transportation. He previously was on the faculty of American University, University of Maryland, and Bowdoin College.
The Auto Bailout – A Taxpayer Quagmire is based on data obtained from the Government Accountability Office and Treasury reports on the Troubled Asset Relief Program. The study was sponsored by the National Taxpayers Union (NTU), a nonpartisan, nonprofit citizen organization founded in 1969 to work for lower taxes, smaller government, accountability from public officials, and economic freedom at all levels. For further information, visit

[NTU via Carscoop]

Photo Credit: Brendan Smialowski/Getty Images

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If I want, I could produce a study, with exactly the same rigor as these people, showing that each GM vehicle sold is making the taxpayers a few hundred dollars.

All I have to do is make rosier assumptions about the market and GM's ability to pay back its loans on time, and look farther into the future.

Without any justification of its (just as kooky) assumptions, this study is worthless. The only reason it exists is to rile up gullible teabaggers like CJinSD.