Dayton Business Journal...
Auto industry creating jobs as bailout success debated
by Joe Cogliano
Tuesday, May 29, 2012 

By all accounts, the U.S. auto industry is back on track as The Big Three are adding jobs and selling more cars. But the real aftermath of the $80 billion U.S. auto bailout remains debatable. 

As election season gets into high gear, the auto bailout is becoming a political hot potato. President Barack Obama supported the bailouts, while likely Republican nominee Mitt Romney opposed them. 

The Dayton region was on the front lines of the auto industry struggles during the recession and was one of the victims of the industry’s near-collapse. 

General Motors closed its SUV assembly plant here at the end of 2008. That plant had employed more than 4,000 workers at one point, and thousands more employees lost their jobs when Delphi closed or reduced operations in the region. Navistar International Corp. reduced its presence in Springfield from two plants to one truck assembly plant, and dropped from more than 5,000 employees to about 700 now. An untold number of other, small manufacturing companies in the Dayton region went out of business after losing work for the auto industry, putting thousands more employees in ever-growing unemployment lines. 

But the region also is benefiting from the healthier auto industry now. The area is home to hundreds of manufacturers with many of them doing business as suppliers to the automakers, accounting for thousands of jobs. And the manufacturing industry is expected to lead the growth of local jobs in 2012, with many area auto suppliers reporting they are adding workers, space and new equipment to meet a boom in demand. Manufacturing growth in Dayton is now close to double the national rate of growth in a recent report. 

So the debate over whether the auto bailout has been a success hits home for many people in the Dayton region, which was once considered a GM town where just about everyone either had a relative who worked at GM or Delphi or new someone who worked there. 

And with Ohio being a vital swing state in the upcoming 2012 Presidential Election, both parties are aware of just how important this topic is in states like Ohio and next door neighbor Michigan. 

As a result, Obama is touting his record of support for the bailout, while Romney is working to put his opposition in a better light. In total, GM and Chrysler and their two financing units received $80 billion in combined bailout dollars, while Ford Motor Co. did not receive any funding. GM’s finance unit has since been sold to Ally Financial. The bailouts came amid the financial crisis that also saw the “too-big-to-fail” banks on Wall Street get billions in tax-payer funded bailouts. 

Paul Leonard, a political science instructor at Wright State University    , said the bailout might still be a political issue this fall because the Democrats haven’t done a good job of selling the message. If he were advising the president, Leonard would have marketed the effort as a “rescue” or “investment.” 

“The Democrats should have never allowed this to be called a bailout,” said Leonard, a former state representative, Dayton Mayor and Ohio Lieutenant Governor. “The Republicans have made this a taxpayer bailout, and that’s a negative. I think it’s more like a profile in courage and I don’t think Barack Obama gets enough credit for the decision that he made. This is a success story; it just amazes me when I hear criticism.” 

Ryan Barilleaux, a political science professor at Miami University    , said the auto bailout is a problematic issue in the presidential election because it cuts two ways. 

President Obama and others who supported it can claim it is a success, so they can point to it as one of those cases where government intervention works by saving the jobs of ordinary Americans. On the other hand, the issue is exactly the sort of thing that fired up the Tea Party movement — big government spending money to support politically powerful interests. In the case of the auto bailout, that means big business allied with big labor. 

“My sense is that those who think the bailout was good policy, especially those in the auto industry and communities where that industry is important, are inclined to vote for President Obama anyway,” Barilleaux said. “Likewise, those who oppose bailouts in general are inclined to support Republican candidates anyway.” 

Did the bailout work? 

The U.S. Treasury Department reports that since GM and Chrysler emerged from bankruptcy, the auto industry has created 115,000 jobs, its strongest period of job growth since the late 1990s. GM, Ford and Chrysler have all returned to profitability, and in 2010, the “Detroit three” gained market share for the first time since 1995. And treasury officials say they are on track to recover most of the $80 billion investment. 

Thomas Traynor, an economics professor at Wright State, said the bailout not only helped the automakers, it probably prevented similar cash flow problems and bankruptcies for suppliers, many of whom were large or sole suppliers to other auto manufacturers such as Honda Motor Co. and Toyota Motor Corp. That helped keep the supply chain intact, which allowed the industry to recover more quickly than without the bailout. Also, Traynor said GM, Chrysler and some suppliers wouldn’t be around today to grow, innovate and supply vehicles and parts to the market without the bailout. 

Now, he sees the industry taking advantage of an increase in demand, which is tied to a gradual economic recovery and need to replace aging fleet of U.S. vehicles. 

“I do consider the bailout a success simply because the probable benefits far outweighed the costs of the bailout,” Traynor said. “Being a particularly big industry, the bailout also prevented a general amplification of the recession.” 

Dayton-area auto suppliers that are growing include: 

• Industry Products Co.    , which is adding 124,000 square feet in Piqua, driven by a reviving demand for new cars and trucks. Chrysler is among its customers. 

• Tipp City-based Process Equipment Co., which has GM and Chrysler on its roster, is gearing up for a $20 million investment to grow and consolidate in Huber Heights. The 150-employee company makes highly engineered, custom machines — typically used for automation on a factory floor; provides machining and fabricating of components; and makes machines to inspect gears. It also is preparing to enter the market to manufacture machines that make gears 

• FC Industries Inc. in Harrison Township is ramping up to hire about 25 workers and invest about $1 million in new equipment by the end of this year to accommodate growth across its four businesses. Among its work, the company makes gas filler systems used in aftermarket service parts for The Big 3 — GM, Chrysler and Ford — as well as by Chrysler in the production of its Jeep Liberty. 

However, Traynor questioned whether recent growth in the auto industry is impacting the Dayton area, as he said a majority of auto activity left the area before the bailout. 

Leonard said Obama could capitalize on the bailout by rebranding it and making a personal appearance in every Midwestern town that has a GM or Chrysler plant, or a large concentration of auto parts suppliers, such as the Dayton region. 

“He should not shy away from that because it was branded a bailout,” Leonard said. “That was a rescue mission. Barack Obama could easily say to America, ‘If we’re going to be a country that’s going to bailout foreign countries and spend the kind of money that we spend to rebuild foreign countries, we should never turn our back on Americans or American industry.’ But he doesn’t talk like that. I just think there’s such an opportunity for the Democratic party to talk about this in a positive way before the election.” 

Romney, on the other hand, will argue the president’s policies have not revived the economy, and have even inhibited growth, even if some sectors may have been helped to prevent collapse. In that case, Leonard said he needs to find a way to deflect talk about his opposition the bailout. 

Barilleaux, who sees the bank bailout as more politically controversial than the auto bailout, expects the overall state of the economy will be the bigger issue in the fall campaign. 

Many companies in Dayton are shy to talk about this topic, as some of the companies that are now benefiting from the trickle-down impact of the bailout have owners who personally oppose the idea of the auto bailout on political grounds. 

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