The global auto industry would have collapsed if the U.S. government had not provided taxpayer-backed financing for automakers General Motors and Chrysler, according to the chief executive officer of Motors Liquidation Co (MTLQQ.PK).
If GM had gone down, the world's supply base would have gone down, said Al Koch, speaking at the Reuters Restructuring Summit in New York. Koch was GM's chief restructuring officer during the bankruptcy and now heads the GM unit that is being liquidated.
There wouldn't have been a manufacturer that could have completed a car, because somewhere on the car there would be a part that needs to come from a supplier that had failed, he said.
I'm not so sure that even Lexus (7203.T) wouldn't have suffered, said Koch. I think that every single manufacturer would have gone down, and the cascading unemployment from that would have been catastrophic.
Earlier this year, the U.S. government helped finance bankruptcies for GM and Chrysler CCMLPD.UL with $60 billion in taxpayer money. The funding helped support operations while the automakers slashed debt and other obligations while in Chapter 11 protection from creditors.
The companies emerged from bankruptcy through a sale process that transferred their best assets to new operating companies funded by the U.S. government while leaving liabilities, excess equipment and some shuttered industrial sites in companies set up as liquidators.
I do believe that if President Obama hadn't done what he did for GM and Chrysler, that the world's auto industry would have collapsed and I believe we would have been in the middle of a worldwide depression, Koch said.
(Reporting by Chelsea Emery; Editing by Gary Hill)