Auto bailout could be key to Obama victory in Ohio

President Barack Obama's decision to help America's automakers could end up being what helps drive him back into the White House.
Associated Press
Oct 24, 2012

Some 850,000 jobs in this critical battleground state are tied to autos and Obama's campaign constantly reminds voters they'd be jobless if not for the decision to inject taxpayer dollars into General Motors and Chrysler. However, the move has not translated into automatic support for the president, even in areas that depend on the industry. Republican Mitt Romney also is pitching these voters hard with his message that Obama hasn't balanced Washington's checkbook the same way voters must.

One in eight jobs in Ohio can be linked to the auto industry — whether it's working on a factory floor or selling groceries to plant workers. The presidential race's outcome could boil down to whether voters interpret Obama's move as saving Detroit or bailing it out. But like other flashpoints in this rough campaign, there is little middle ground between the versions of events and what it means for voters' neighbors.

"I couldn't imagine what Lordstown would be," said Brian Axiotis, a 37-year-old Obama supporter who works in information technology and lives in nearby Newton Falls. "A lot of folks would lose their houses. Consider the mess that would have resulted. It'd be a ghost town all over the area."

Since its restructuring, the General Motors plant in this town of 4,000 people southeast of Cleveland has added a third shift — and 1,200 new workers with it — to produce the popular compact Chevy Cruze. GM has pledged $220 million in updates to the factory and to keep the 4,500 workers, suggesting this town in the former steel-heavy Mahoning Valley has some stability ahead.

Romney volunteer Frank Perrotta still finds Obama's decision to loan automakers billions a misuse of public dollars. Between calls to voters at Romney's office in Stow, he shakes his head when talking about the government's move to prevent the collapse of GM and Chrysler. The bailout began in 2008 under Republican George W. Bush and Obama extended it.

"I have to run my business responsibly. No one is coming to bail me out if I get into trouble," said Perrotta, a 63-year-old Hudson resident who runs a medical imaging business that employs nine workers. "The bailout was just not fair."

Romney opposed using government money to save the car companies in a 2008 op-ed piece in The New York Times, titled "Let Detroit Go Bankrupt." Romney preferred a managed bankruptcy, without federal money, and has maintained the rescue was unfair, unnecessary and political payback to labor unions.

"If we had taken your advice, Gov. Romney, about our auto industry, we'd be buying cars from China instead of selling cars to China," Obama said in Monday's presidential debate.

His statement sparked one of the most contentious moments of the evening, with the two interrupting and arguing over one another about what impact Romney's idea would have had. "I would do nothing to hurt the U.S. auto industry," Romney said, touting his affection for American cars, his Detroit roots and his father's leadership of American Motors Corp.

Obama insisted Romney was "trying to airbrush history" and suggested voters should check the record.

While GM paid back its loan and the government took an ownership stake, the Treasury Department estimates Washington might lose about $25.1 billion on its investment. It smacks of government waste for its critics.

"They should've followed the bankruptcy process that applies to the rest of us who don't have union bosses for friends. They bailed out their buddies," said Loretta Hurite, a 74-year-old Romney supporter from Cuyahoga Falls working the phones in Stow.

And so it continues through the state, where polls are close and both campaigns are in overdrive. No Republican has ever won the White House without carrying Ohio, and John F. Kennedy's 1960 campaign was the last Democratic effort to win the presidency without it. Voters here are bombarded with campaign ads and candidate visits, mail at the ends of their driveways and phone calls at all hours.

Obama's allies never hesitate to raise the bailout in visits to the state. "Osama bin Laden is dead, and General Motors is alive," Vice President Joe Biden roars at rallies, always a sure-fire applause generator.

Obama's team even has former President Bill Clinton making the point.

"It's important to remember than one in eight jobs in the state of Ohio is tied to the auto industry," Clinton told voters in Parma last week. "When you were down and you were out, the president had your back. Now, you've got to have his."

Not so fast, says Dennis Muniak, a 60-year-old Parma resident who attended the Clinton rally near Cleveland.

"Seven out of eight jobs aren't auto jobs," countered Muniak, who is drawing disability benefits.

Back in Trumbull County's city of Warren, just across the railroad tracks from the Lordstown plant, General Motors retiree George Vukovich cast his ballot early for Obama.

"In this valley, we are autos. Obama took care of us. He kept his promise. Now, we have to have his back," the 61-year-old Vukovich said before acknowledging the auto industry's heyday might be in its past.

Across the street from the early voting site, weeds are growing high at a car audio shop that has shut its doors. A retail plaza next door is vacant.

"We were lucky. We worked through the glory days of the 1970s, '80s and '90s," Vukovich said. "Those days are over. But I have great insurance and I have a great retirement."

Thanks to the taxpayers, Chuck Wirebaugh clucks.

"Obama sold out to the auto unions. GM would be better off had it gone through bankruptcy like everyone else has to. Instead, they got special treatment and a sweetheart bailout," the 69-year-old retiree from Cortland said after he cast his ballot early for Romney.

"Obama shouldn't have the job," Wirebaugh said. "He should be a used car salesman. It's about the only thing he's qualified to be."

 

Comments

Swamp Fox

Would you hire President Obama as your financial adviser? Three years ago his administration invested more than $100 billion in taxpayer money to bail out General Motors. On Tuesday, the entire company, not just what the government owns, was worth less than $34 billion. By anyone’s definition, that investment is a glaring failure. Yet over the last few days the Obama campaign, in a $25 million marketing blitz, has flooded the airwaves with ads in battleground states, claiming the bailout should be counted a rousing success.

Unfortunately, assertions that “all loans have been repaid to the federal government,” that the bailout “saved more than one million American jobs,” that “U.S. automakers are hiring hundreds of thousands of new workers,” that GM is again the “number-one automaker” — all are based on creative accounting.

The money the government spent adds up quickly: $50 billion in TARP bailout funds, a special exemption waiving payment of $45.4 billion in taxes on future profits, an exemption for all product liability on cars sold before the bailout, $360 million in stimulus funds, and the $7,500 tax credit for those who buy the Chevy Volt. GM’s share of other programs is harder to quantify but includes, for example, some of the $15.2 billion that went to Cash for Clunkers. Those costs are in addition to the billions taken from GM’s bondholders by the Obama administration.

A look at the accounting shows the trouble with contentions that much of the TARP money is getting paid back. The Obama administration compares the $50 billion in direct bailout funds with the price it will eventually be able to get for selling the GM stock it owns. But that assumes that the stock price won’t reflect government subsidies, including GM’s exemption from paying $45 billion in taxes. By the Obama administration’s logic, if the stimulus grants to TARP recipients were simply large enough, all the TARP money could be paid.

Claims that GM paid back its TARP loan are true but misleading. President Obama clearly wants to create the impression that all the money given to the auto companies has been paid back. But the $6.7 billion loan to GM was just a tiny fraction of the money given to it. As TARP special inspector general Neil Barofsky explained, GM used “other TARP money” to pay off the loan.

So what about President Obama’s boast in a White House speech in late April that the bailout “saved probably a million jobs” and that “GM is now the number-one automaker again in the world”?

The “million jobs” contention is quite a stretch. Before filing for bankruptcy in July 2009, GM had 91,000 employees in the United States. You can reach a 400,000 total by assuming that all of GM’s jobs, as well as all the jobs of its parts suppliers and car dealers, would have been lost. Last year, employment in the entire automotive industry in the U.S. (counting Ford, Toyota, and other companies and their suppliers, in addition to GM and Chrysler) was only 717,000.

Obama’s economic advisers told him during an April 2009 meeting that job losses in the auto industry would be only a fraction — 10 to 20 percent — of these claimed numbers, even for the much weaker Chrysler. The advisers reported the obvious: Bankruptcy would not kill all jobs at GM and, even with cutbacks, suppliers would pick up other work. But Obama keeps using numbers that his own advisers told him were wrong.

Even saving 20 percent of 400,000 comes at quite a cost — at least $780,000 per job. How many workers would have been willing to quit working for GM for a $400,000 severance payment?

The “number-one automaker” assertion is no more accurate. Obama’s sales totals include 1.2 million mostly cheap commercial vehicles built by China’s Wuling, a company in which GM owns a small stake, and it excludes sales by vehicle makers in which Volkswagen owns a majority share. Fortune magazine lists GM’s revenue as smaller than Toyota’s and Volkswagen’s.

The only real winners from the GM bailout were unions, which were protected from pay cuts, from losing their right to overtime pay after less than 40 hours a week, and from cuts to their extremely generous benefits. They faced only minor tweaks in their inefficient union work rules.

As for “hundreds of thousands of new workers,” the truth is closer to a tenth of that.

Having just $34 billion to show after a $100 billion-plus investment would get a chief executive of any private company fired. Unfortunately, Obama does not seem to understand how this money has been wasted.

— John R. Lott Jr. Economist

bored reader

Like button please....give me a like button. Now here comes the liberal junkies to declare the Obie successes. Maroons.

mikel

not only does gm still owe the fed gov't billions of dollars the toll has climbed higher than originally thought. the interest that the fed gov't has had to pay on borrowing money to bailout gm and chrysler has cost extra of $millions$ of dollars. gm also is using some of the bailout money to finance the expansion of factories in both china and mexico. the chinese and mexicans would like to thank the american gov't for providing them jobs while americans sit at home collecting unemployment or welfare. thats a good trade off...not!!

Taxed Enough Already

Also many of the GM jobs have gone to Canada. I for one will never buy a GM car again and for the first 30 years of my purchasing cars they were mostly GM cars. I prefer to purchase vehicles made in America.

Bess

Bored-
It's moron not "maroons".

Randy_Marsh

Not a big Bugs Bunny fan huh? What a maroon.

bored reader

Thanks, glad someone got it. Bring back the real cartoons!!

Taxed Enough Already

I use that comment all the time...I love it. "What a maroon"!

JACKEL

Bess,I believe he meant Bozo was a Maroon,Moron !

The Big Dog's back

If Government was intended to be a business, the Founding Fathers would have written our Constitution that way.

mikel

then they should stay out of business's

Darwin's choice

So, failure at it is acceptable to you?

Erie County Resident

This is the only statement you've ever made I can agree with.
To bad Ovomit is trying to take over all business's in the USA.
Healthcare, banking, autos, insurance, etc..etc..
He wants to run them all.
Government has no business period putting one cent into any form of company to turn it into a state operated or guided business.
But Ovomit wants to be everyones savior and buy their votes.

JACKEL

Have you seen the new ad with the kids singing ?

deertracker

Think much? Ditto head! Get original please!

eriemom

I know that this is old and you may not read my reply, so I also posted it on the Kasick/economy story. You need to find this and read it.

Obama hired Steven Rattner, himself a millionaire hedge fund manager, to head the task force that would negotiate with the troubled firms and their creditors to avoid the collapse of the entire industry. In Rattner’s memoir of the affair, Overhaul, he describes a closed-door meeting held in March 2009 to resolve Delphi’s fate. He writes that Delphi, now in the possession of its hedge fund creditors, told the Treasury and GM to hand over $350 million immediately, “because if you don’t, we’ll shut you down.” His explanation was corroborated by Delphi’s chief financial officer, John Sheehan, who said in a sworn deposition in July 2009 that the hedge fund debt holders backed up their threat with “an analysis of the cost to GM if Delphi were unwilling or unable to provide supply to GM,” forcing a “shutdown.” It would take “years and tens of billions” for GM to replace Delphi’s parts. At that bleak moment, GM had neither. The automaker had left the inventory of its steering column and other key components in Delphi’s hands. If Delphi laid siege to GM’s parts supply, the bailout would fail and GM would have to be liquidated or sold off—as would another Delphi dependent, Chrysler.
Rattner could not believe that Delphi’s management—now effectively under the hedge funders’ control—would “want to be perceived as holding GM hostage at such a precarious economic moment.” One Wall Street Journal analyst suggested that Singer was treating Delphi “like a third world country.” Rattner likened the subsidies demanded by Delphi’s debt holders to “extortion demands by the Barbary pirates.”
Romney has slammed the bailout as a payoff to the auto workers union. But that certainly wasn’t true for the bailout of Delphi. Once the hedge funders, including Singer—a deep-pocketed right-wing donor and activist who serves as chair of the conservative, anti-union Manhattan Institute—took control of the firm, they rid Delphi of every single one of its 25,200 unionized workers.
Of the twenty-nine Delphi plants operating in the United States when the hedge funders began buying up control, only four remain, with not a single union production worker. Romney’s “job creators” did create jobs—in China, where Delphi now produces the parts used by GM and other major automakers here and abroad. Delphi is now incorporated overseas, leaving the company with 5,000 employees in the United States (versus almost 100,000 abroad).

Romney benefited from TARP personally. To the tune of millions. I am still digging, but I think that much of the money that went to Romney was from the liquidation of pensions.

John Harville

Yes to the initial question.

DGMutley

Not only did Presidents Bush and Obama bail out Ohio jobs but their actions prevented the world from going into a depression. Serious stuff here, folks.

Governor Romney likes to brag about balancing the budget at the 2002 Winter Olympics in Salt Lake City but neglects to say he did it with a 600 million dollar government bailout and an additional 1.2 billion from the government for infrastructure improvements--talk about spending government $$$.

Erie County Resident

Sure thing DG, here is where a lot of our tax dollars for GM went.
http://www.youtube.com/watch?v=L...

DGMutley

ECR, I glanced at the video, thanks for sharing it. The ad that is running claiming GM used the bailout money to boost China operations is rated false by PolitiFact.com.

It isn't any secret that GM has been most profitable in its out of country operations. When China has 1.3 billion people it would be foolish not to enter that market.

I was a bit miffed that one of the first things GM did with the bailout money was to close 1100 dealerships. Kind of contrary to the theory of marketing.

Nevertheless, without GM's bailout we would have been in dire straits.

JACKEL

Where did the money come from?

Darwin's choice
Mime Bloggling's picture
Mime Bloggling

Here's 22,000 reasons why NOT to vote for Obama.

http://www.detroitnews.com/artic...

Delphi debacle spoils Obama bailout boast

sanduskysteve

Funny - what this obviously anti-obama article fails to mention is that it was an investment by a Romney company that closed most of those plants and sent them to China and Romney made literally millions from that bailout money AND from gutting the company - just like he has done in the past with Bain. Sometimes the facts get into the way of reality huh?

Erie County Resident

Really sanduskysteve?
Watch this entire video and then tell me all about China & GM.
http://www.youtube.com/watch?v=L...

sanduskysteve

I was specifically referring to delphi - and I don't need to watch a video - I know what happened - you should probably stay off of youtube and check actual facts for a change. romney made millions from the delphi move to china.

John Harville

Oh oh Steve. Careful. They don't like facts.

sanduskysteve

Well, here is another big one they can chew on for a while - I believe by now, most of you have read my comment telling that the Romney Bobblehead is made in China in a factory that his brother-in-law OWNS over there. Today I found out that if you compare the baseball hats for Romney-Ryan with those made for Obama-Biden - you would find yet another telling bit of information - the Romney hats are "Made in China" whilc Obama's hats all say "Made in USA". Strange how the China thing keeps coming back to bite Romney in the arse - and he is still going to "get tough on China". Like hell he will -he loves China and has proven it over nad over and over again. Would a republican like to comment on this one? No one did on the bobble-head comment. Of course, republicans will just post another link to youtube or FOX - or use the normal change the subject - throw an insult and run away as fast as possible from and actual FACT.

Darwin's choice

The same old song and dance Obama......http://youtu.be/fZgQhnNRSuw

The New World Czar

Not everyone drives GM and Chrysler products. We'll remember that at the polls as Obama's big lead has shrunk to a dead heat.

By the way, how's everyone's GM stock doing today?

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