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Obama touts auto bailout during Michigan trip

By Michael D. Shear and Peter Whoriskey
Saturday, July 31, 2010;

DETROIT -- The government's bailout of the American auto industry last year sparked political hand-wringing about the end of capitalism and allegations that President Obama aspired to be CEO of what critics dubbed "Government Motors."

After the president forced the firing of General Motors chief executive G. Richard Wagoner Jr., Republican Sen. Bob Corker (Tenn.) proclaimed Obama's actions "truly breathtaking" and said the government ownership roles at Chrysler and GM "should send a chill through all Americans who believe in free enterprise."

But a year and a half later, many of the critics have retreated from their sharpest attacks as they watch the auto industry once again turn a profit and begin adding jobs in communities such as Detroit, which desperately need them.

Obama's visit to a Chrysler plant in Detroit on Friday was designed as a victory rally -- complete with campaign-style trappings -- an "I told you so" event aimed squarely at his Republican critics who had attacked the auto bailouts as government takeovers.

A feisty Obama was welcomed with loud applause by about 1,500 auto workers inside the plant that makes the Jeep Grand Cherokee, a vehicle the president said was the first new car he ever owned. If his critics had won, he said, the plant would have been shuttered and dark.

(Obama drives a car, haltingly)

"If some folks had their way, none of this would be happening," he said, calling out the "leaders of the 'just say no crowd' in Washington" and sparking loud boos from the crowd when he added that "one of them called it the worst investment we could make."

There's no satisfying some, like radio host Rush Limbaugh, who this week referred to GM as Obama Motors. And the auto turnaround is not enough to fix places like Detroit, where 30 percent unemployment has ravaged the city like few others in the United States.

But as Obama arrived here Friday to trumpet the industry's progress, Corker refrained from saying that the bailouts were bad for the country. He says the administration's methods were "heavy-handed" but also takes credit for helping to shape the bailout. He prodded the Obama administration to force the companies to lessen their debt and achieve a more favorable union agreement.

"The ideas we laid out there were followed through," Corker said in an interview. "I take some pleasure out of helping make that contribution. . . . I think what we did is we forced a debate and we forced a hard look at these companies."

(More on the automobile industry bailout)

When it comes to critics who continue to condemn the bailout, the White House is not in a forgiving mood. Press Secretary Robert Gibbs said Thursday that critics such as Limbaugh were willing to forsake auto workers just at the time they needed help the most.

"I'll let those that sat in the cheap seats a year and a half ago and wanted to walk away from a million [jobs] explain to every one of those workers why they made that decision," Gibbs told reporters. Then he added: "Ask Mr. Limbaugh -- I don't know what kind of car he drives, but I bet it's not an [Ford] F-150."

Sharp words aside, the White House is eager to tell a success story ahead of the congressional midterm elections this fall. The president's Friday visit and another to a Ford plant outside of Chicago next week are intended to tell that story more widely to potential voters.

(Behind the numbers: Democrats take fight to ... Obama?)

The president started at Chrysler's Jefferson North plant, where Jeep Grand Cherokees are being built, and then toured a GM plant which will produce the company's first electric car, the Volt. Both are churning out cars, adding shifts of workers and helping to keep suppliers in business across the Rust Belt.

"In the year before these bankruptcies, these companies lost almost 340,000 jobs," said Ron Bloom, the administration's top auto official. "In the year since then, 55,000 jobs have been added to these companies. If we hadn't stepped in when we did, most observers believe at least a million jobs would have been lost."

Previewing both the substance and intensity of his campaign-year rhetoric, Obama made clear Friday that he will use the success of the auto turnaround as a centerpiece of the argument that his economic policies have created an economic recovery.

"Don't bet against the American worker," he said, his voice rising over the cheers from the audience. "Don't bet against the American people. We've got some more work to do. It's going to take some time to get back to where we want to be, but I have confidence in the American worker . . . I have confidence in this economy. We are coming back."

That message, in particular, was received well in the cavernous assembly plant, where many of the workers described a welcome turnaround in morale from a year or two ago, when scared workers took buyouts because they feared the end was ear.

"The morale is different now," said Erik Williams, 38, who has worked at the plant since 1994. "When you know you are on the brink and you come back from that, it puts it in a different perspective."

Several of the plant workers said Obama deserves much of the credit for believing in the industry and its employees.

"I've been here 16 years and last year was the worst year of my life. it was terrible," said James Tiedt, 39. He said he almost lost his house to foreclosure last year but was saved by one of the government's housing programs. Of Obama, he added: "He's the man."

Obama made similar remarks later Friday at GM's Hamtramck, Mich. plant, where the company builds the Volt.

"You're producing the cars of the future right here at this plant, producing cars that are going to reduce our dependence on foreign oil," the president said, pointing to the Volt. "This car right here doesn't need a sip of gasoline for 40 miles and then keeps on going after that."

The auto industry bailout Obama launched may be ranked as the largest single jobs program undertaken by the administration.

The administration says that the bailout and restructuring of the companies has put the entire industry on better footing than it has been in years. In the first quarter of 2010, GM earned a quarterly profit of $865 million, its first since 2007. Chrysler reported an operating profit of $143 million over the same period.

Preliminary figures suggest that auto industry employment in the United States may reverse a decade of decline.

"The president has taken his lumps" for the auto company bailouts, Gibbs said. But "walking away would have meant a million more people looking for work."

In 2000, 1.3 million people were directly employed in the motor vehicles and parts industries, according to the Bureau of Labor Statistics. But by the summer of last year, that figure had fallen to about half that, or 626,000. Since then it has begun rising and stood in June at 690,000.

The auto industry financing program, which began under the Bush administration, extended about $85 billion to General Motors, Chrysler, GMAC and Chrysler Financial. Those investments were justified by the Obama administration as a means of saving an estimated 1 million jobs or more. Wagoner's removal as GM's chief executive was justified as necessary to clear the way for radical change at the automaker. (Wagoner is a Washington Post Co. director.)

Today, most of the government money is expected to be repaid, but the program's ultimate cost was estimated by the administration in March to be $24.6 billion. Administration officials predict that the expected loss will fall as the companies in which the United States has an ownership stake grow in value.

General Motors is expected to have a public offering of stock as early as August; Chrysler's is expected next year. The government investments could be repaid then.

Even if the auto financing program costs the government the $24.6 billion, letting General Motors and Chrysler collapse might have cost the government more, according to some analysts. The Center for Automotive Research in Ann Arbor has estimated that the closures would have cost the government $27 billion in lost tax revenues, mostly personal income tax, and about $10 billion for benefit payments such as unemployment.

"In the middle of the worst recession we've had in a long time, it would have been devastating," said Kim Hill, associate director of research at CAR.

The success of the program has earned acknowledgment from people like Corker, who says that without the auto industry bailout, "Who knows what would have happened?" He adds that, "I'm genuinely pleased that people across this country that are involved in the auto industry are seeing it come back and that Americans are being employed as a result."

For those in Detroit, the help is welcomed, but not nearly enough. Mayor Dave Bing, a Democrat, praises Obama for making the decision to bail the industry out. But he notes that Friday's visit is Obama's first to Detroit as president, a delay that he said has angered residents here.

"The people here have been hoping that the president would come and let us know that this city has the administration's support," Bing said. "We expected him and wanted him to come here."

Asked what the auto plants mean for the city's future, he said, "not much." Unemployment in Detroit is more than three times the national rate, he said, and the city needs far more government assistance to turn that around.

"This city can't depend upon a auto plant for its future," Bing said. "That plant won't do a lot for bringing this city back."

But he quickly echoed what many people are saying more than a year after the auto bailout: It could have been worse.

"He saved a lot of jobs," Bing said. "He saved an industry."

Whoriskey reported from Washington.

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