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Obama Campaigns to
Gain Car Industry Bailout Credit at Ohio Chrysler Plant
By Hans Nichols and Tim Higgins
Jun 3, 2011
Obama’s trip to a Toledo plant that assembles Jeep Wranglers follows a
week of White House publicity about the automotive revival, including a
May 28 radio address by Vice President Joe Biden and a June 1 White
House report saying $80 billion of federal aid for Chrysler and General
Motors Co. saved at least 1 million jobs at automakers and their
suppliers. Photographer: Andrew Harrer/Bloomberg
As President Barack Obama tours a Chrysler Group LLC assembly line in
Ohio today, gaining political credit for the automobile industry’s
government-aided turnaround may be as challenging as returning U.S.
carmakers to profitability.
Obama’s trip to a Toledo plant that assembles Jeep Wranglers follows a
week of White House publicity about the automotive revival, including a
May 28 radio address by Vice President Joe Biden a June 1 White House
report saying $80 billion of federal aid for Chrysler and General
Motors Co. saved at least 1 million jobs at automakers and their
suppliers.
The president also will have some good news to deliver for taxpayers:
Fiat SpAt and the U.S. Treasury Department announced last night that
they have reached an agreement for the Italian auto company to buy the
government’s remaining 6 percent stake in Chrysler for $500 million.
Obama’s task is to persuade voters that, while recovery has been slow
in coming, the recession would have been far worse without government
action to keep GM and Chrysler in business, said Steve Rattner, the
former head of the president’s automotive task force.
“It’s very hard to convince people of what would have happened if you
didn’t do something,” Rattner said. “People hate bailouts. They are
angry about a lot of things and it’s a knee-jerk reaction, without a
substantive foundation.”
Jobs Created
Making his 14th trip as president to Ohio, a battleground state that
has backed every winning presidential candidate since 1964, Obama will
point to the creation of 115,000 auto industry jobs since GM and
Chrysler left bankruptcy and rising market shares at GM and Chrysler.
Ford Motor Company (F), which didn’t take a federal bailout, posted its
biggest annual profit in more than a decade.
Ohio’s jobless rate was 8.6 percent in April, below the nation’s 9
percent rate. Next door in Michigan, 10.2 percent unemployment reflects
a drop of almost 4 percentage points since September 2009. The U.S.
unemployment rate for May will be released today.
Obama will stress that the auto industry accounts for only a portion of
250,000 new manufacturing jobs since December 2009, Ron Bloom, the
White House adviser for manufacturing policy, said at a briefing.
“The automobile industry is a story of manufacturing, but there’s a
broader manufacturing story as well that we think needs to be brought
to attention,” he said. While the future isn’t guaranteed, federal aid
for GM and Chrysler gave the U.S. auto industry a “real chance of
success,” Bloom said.
Republicans say the federal aid was unnecessary government involvement
in private industry.
‘Nothing to Celebrate’
“The administration’s auto bailout is nothing to celebrate,” said
Brendan Buck, a spokesman for House Speaker John Boehner, an Ohio
Republican. “There were better options that could have saved jobs for
these workers. The model the White House should be touting is Ford,
which, instead of relying on a taxpayer-funded bailout, saw trouble
coming and made the tough decisions necessary to preserve jobs and
weather the storm.”
“Unemployed workers in Ohio aren’t looking for a presidential victory
lap, they need jobs,” Kevin DeWine, the chairman of the Ohio Republican
Party, said in a statement.
In Toledo, where GM last week said it would add 200 jobs, the economy
is on the mend, Mayor Michael Bell said. The Bloomberg, Toledo Index of
33 companies, designed to measure the local economy, has risen 11.5
percent in the past year.
“Toledo is on the upswing,” Bell said. “Are we still hurting? Yeah, but
we are a little bit better off than a couple of years ago.”
Employment Doubled
Transportation-equipment manufacturing employment in metropolitan
Toledo has more than doubled to 8,200 from 3,400 in June 2009,
according to the Bureau of Labor Statistics. As recently as June 2008,
transportation equipment jobs topped 11,000.
For Obama to win Ohio next year, more job gains are likely needed, said
Bell, who ran as an independent. “In the city of Toledo, he’d probably
still be OK,” he said. “As far as the rest of Ohio, if you get too much
past 7 percent, he may have an issue.”
The White House’s June 1 report on the auto industry highlighted
employment at plants in Ohio, Indiana and Michigan- - battleground
states that Obama carried in 2008 and that will be important to his
re-election chances in 2012.
At Chrysler, where the Toledo plant produces 200,000 cars a year, U.S.
market share rose to 10.9 percent last month from 8.5 percent in May
2009, when the automaker was under bankruptcy- court protection,
according to Autodata Corp., an industry researcher based in Woodcliff
Lake, NJ.
‘Well On Their Way’
Altogether, Chrysler has added almost 6,000 jobs since leaving
bankruptcy, Shawn Morgan, a company spokeswoman, said in an e-mail.
“They’re not out of the woods yet, but they are certainly well on their
way to recovery,” Rebecca Lindlandan industry analyst with IHS
Automotive, said in a telephone interview. Chrysler probably wouldn’t
have survived without the bailout, she said. “We definitely would’ve
had a significant failure had they not bailed them out.”
The government so far has gotten back about $40 billion of the $80
billion taxpayers provided to stabilize the auto industry, according to
the June 1 White House report. Bloom said that losses ultimately will
be about $14 billion, down from $48 billion forecast in 2009, citing a
Congressional Budget Office report.
Loans Repaid
Chrysler Group LLC on May 24 announced that it has repaid $7.6 billion
in U.S. and Canadian government loans. As part of its agreement with
Treasury, Fiat is also purchasing, for $75 million, the right to buy
all of the shares in the Auburn Hill, Michigan-based automaker retained
by the United Auto Workers retiree trust. The Treasury will receive 80
percent of those proceeds, or $60 million, with the remaining $15
million going to the government of Canada.
After Detroit-based GM’s initial public offering last November, the
U.S. sold almost half of its GM common equity. The U.S. government now
owns 33 percent of GM’s outstanding shares.
Since GM’s IPO at $33 a share, the stock has fallen more than 10
percent to $29.60.
Chrysler last month posted a first-quarter net profit of $116 million,
its first since bankruptcy, and global sales during that period
increased by 18 percent. GM reported its fifth straight quarterly
profit as U.S. sales climbed 25 percent in the first quarter.
“Without the bailout, the auto industry would only be a shadow of what
it is today,” said Mark Zandi, chief economist at Moody’s Analytics
Inc. in West Chester, PA who said he hasn’t done an in-depth analysis
of the bailout. “It would have cost the economy tens of thousands of
jobs in the industry and many other industries that depend on the auto
industry.”
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