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10 years later: A look back on the automotive bankruptcy

DETROIT – The unthinkable happened 10 years ago when Chrysler and General Motors tumbled into bankruptcy -- a fate that awaited Detroit a few years later.

The Big Three were able to overcome the indignity to survive nearly a decade after they almost lost everything.

Chrysler filed for bankruptcy April 30, 2009. A little over a month later, General Motors, one of the world's most powerful companies, filed for bankruptcy June 1, 2009.

It was a perfect storm. In late 2008, a global recession hit. Combined with several years of declining automobile sales and gas at more than $4 a gallon, it led to an automotive crisis that deeply impacted Detroit. 

There was economic wreckage everywhere. Companies like Lehman Brothers, Merrill Lynch and Citibank were in ruins, which is why the automakers turned to the federal government.

"Of course, we went to the banks," said Bob Lutz. "Of course, we went to private institutions, and of course, when we went to the banks and said, 'We need a few billion to tide us over,' they just turned their pockets inside out and said, 'We're in worse shape than you are.'"

Lutz knows the industry well. He worked with all Big Three companies during his career, working as executive vice president of Ford Motor Company, president and vice chairman of Chrysler and vice chairman of General Motors. He even worked at BMW in the early 1970s as executive vice president of global sales and marketing.

Automakers were frustrated with the signs that few people in Washington D.C., understood the reach of an industry that affected one in every eight American jobs.

"The great preponderance of carpeting in the United States doesn't go into offices and homes, it goes into cars," Lutz said. "We don't think of the glass industry as an automotive industry, but it is. Most glass goes into cars."

In a decision still debated, the automakers received help similar to 2008's bank bailout, claiming the companies could lose about 1 million jobs. The American government pumped nearly $81 billion into the auto industry. It would never get it all back. In the end, it was a $10 billion loss for taxpayers.

Stockholders, bondholders, retirees and manufacturing plant communities took a major hit, but the companies lived to fight another day. Had Chrysler and General Motors fallen into collapse, it would have been devestating for Metro Detroit.

Daniel Howes, with The Detroit News, believes the quick bankruptcy of the automakers paved the way for the city of Detroit's bankruptcy in 2013 -- the largest municipal bankruptcy in history. 

RELATED: Looking back at how Detroit has bounced back from bankruptcy

"[Detroit] was the home of the largest corporate bankruptcy in American history and the home of the largest municipal bankruptcy in American history," Howes said. "That doesn't mean they're going to be the only ones, but I think if you look at the city today and the auto industry today, you'd have to say a lot of what they did worked."

You can see Devin Scillian's full interview with Bob Lutz below.


About the Authors
Devin Scillian headshot

Devin Scillian is equally at home on your television, on your bookshelf, and on your stereo. Devin anchors the evening newscasts for Local 4. Additionally, he moderates Flashpoint, Local 4's Sunday morning news program. He is also a best-selling author of children's books, and an award-winning musician and songwriter.

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