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General Motors leads revival of Motor City – but not everyone is happy

GM’s record-breaking profits would seem to show that Obama’s auto bailout has been a success, though not all are convinced

As General Motors goes, so goes the nation, auto industry legend Lee Iacocca once said. If he was right, Thursday was a good day for America. Two years after emerging from bankruptcy GM unveiled record profits of .6bn for 2011.

It’s been a great year for GM. Although its European business is still in reverse and it is unlikely ever again to dominate the world as it once did, the car giant is clearly on the mend. Once more GM is the largest automaker in the world, after wrestling back the crown from Toyota in January.

It’s not alone. Ford and Chrysler too have bounced back, making profits and adding jobs. Ford made a profit of .8bn last year, the third year in a row profits had increased. Chrysler, the weakest of the three, reported a 3m profit earlier this month, its first full year of profit since 2005. More than a million jobs have been saved by the bailout of the US auto industry, according to the Center for Automotive Research (CAR). CAR estimates US car manufacturers will add 200,000 new jobs by 2015.

With the car firms back on the road it’s easy to forget that the massive auto industry bailout was extremely controversial. President George Bush, much to the anger of the right wing of his party, had first approved loans to the automakers in 2008 as their sales slumped and debts piled high. Barack Obama’s decision to bail them out proved to be the first big test of his presidency. Now he is claiming it as one of his biggest victories. “Osama bin Laden is dead and General Motors is alive,” vice president Joe Biden said recently, outlining Obama’s re-election campaign.

But not everyone is happy. Mitt Romney, bruised frontrunner for the Republican presidential nomination, slammed the bailout this week in the Detroit News, hometown newspaper for the US auto industry. Romney, the son of a former car executive, said the deal was “crony capitalism on a grand scale”. In a direct appeal to the right wing of his party he said Obama has sold out to the United Auto Workers (UAW), which was given a stake in the car firms as part of the bailout conditions.

The attack may play well with Republican right wingers, even those in Michigan where Romney faces a crunch vote later this month. But among the state’s wider population, Romney’s comments are as welcome as a car crash.

“Absolutely this intervention was a success,” said CAR director Kristin Dziczek. She said at the time of the bailout a lot of “economic Darwinists had said ‘they screwed up, let them die”, but if they had got their way, the consequences would have been dire.

In 2000 the US auto industry employed 1.13 million people. In July 2009 that number had fallen to 500,000. “Can you understand how depressing it was to be an auto industry analyst in the early 2000s? Every line on every chart we put out was trending down,” said Dziczek.

The knock on effects for the wider economy were huge. Analysts estimate that every auto industry job creates nine other jobs in the wider community. In Michigan there were no other large industries looking to take the car manufacturers’ place. Post bailout, CAR is predicting the US automakers will employ close to 757,000 people by 2015. The car industry may never get back to 1m jobs, but the lines are at least moving in the right direction.

“I thank God for the loan agreements,” said UAW president Bob King. “They were very successful.”

Far from being “crony capitalism” King said it was a smart move to bring in the unions as shareholders. “We are all in this together. Companies and unions can not succeed in global competition if they are in an adverserial relationship. Nobody has more at stake in the success of a company than the workforce. CEOs come and go, exceutives come and go, shareholders come and go. But the workers stay. We are very committed to the success of Ford, Chrysler and GM,” said King.

He said the loan agreements were a “great example of governments, unions and business all working together”.

Even President Bush seems to be happy with the bailouts. Earlier this month at the National Automobile Dealers Association convention in Las Vegas, Bush defended his role in the loan programme.

“I didn’t want there to be 21% unemployment. I didn’t want to gamble. I didn’t want history to look back and say, ‘Bush could have done something but chose not to do it.’ And so I said, ‘no depression,’” he said. “I’d make the same decision again if I had to.”

The US taxpayers leant the auto industry .69bn under the troubled asset relief programme (Tarp) and so far has been paid back .18bn. Letting the firms fail would ultimately have been far more expensive to US taxpayers, said Dziczek. Romney and his supporters could not disagree more.

“The dream of the Motor City is and always has been one of ideas, innovation, enterprise, and opportunity. It started with Henry Ford, and continued with visionaries like William Durant, Walter Chrysler, and the Dodge Brothers. These giants never envisioned a role for government in their business, but relied on the hard work and commitment of private individuals,” Romney wrote this week.

The car firms themselves are staying out of it. “Our full time energy is devoted to running our business, building great cars and trucks and making a profit,” said Greg Martin, GM’s director, of policy and Washington communications. “Anything else for us during this high political season is a mere distraction.” © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds