Even the most casual viewer of last week's Democratic National Convention would get the point: President Barack Obama saved the American auto industry.
Massachusetts Gov. Deval Patrick called him the president "who saved the American auto industry from extinction." The former CEO of the supersized used car dealership CarMax, Austin Ligon, said the president's decisive action to restructure General Motors and Chrysler "helped prevent a domino effect that would have taken down everything in the auto industry, from the factories that manufactured auto parts to the dealers who sold the cars." And Michelle Obama talked about how her husband "fought to get the auto industry back on its feet."
One should make allowances for the exuberance of political speech. But when a party shines a spotlight on a particular claim during the week when it trots out its best and brightest, we should take a closer look.
We ask: Did Obama really save American automakers? This is more a matter of opinion, and not an item for the Truth-O-Meter, but we can still shine some light on the question.
In broad strokes, the answer is yes, but with some help from the other party and with one huge unknown -- no one can say what would have happened without government intervention. We spoke with a number of analysts and read many independent reports. There is no question that General Motors and Chrysler are profitable today. But so is Ford, a company that received no aid at all. The jobs have returned -- although not at the level they were before the industry began its steep decline in 2007.
Without a doubt, the American auto industry emerged smaller and more competitive.
In the words of the bipartisan Congressional Oversight Panel that assessed the impact of the government's efforts: "The industry's improved efficiency has allowed automakers to become more flexible and better able to meet changing consumer demands, while still remaining profitable."
Barack Obama, however, cannot claim full credit for this outcome. According to several experts, he needs to share it with his predecessor, President George W. Bush. Dr. James Rubenstein at Miami University cowrote a post-bankruptcy assessment for the Federal Reserve Bank of Chicago. Rubenstein said no one should overlook the importance of Bush's decision to use $17.6 billion in TARP money in December 2008 to keep General Motors and Chrysler afloat.
"The Bush administration provided short-term bridge loans," Rubenstein said. "That allowed the Obama administration to take a couple of months to assess the situation"
Layoffs in 2008
In 2008, the entire auto industry was in very bad shape. Layoffs at auto plants and among auto parts suppliers were on track to reach 250,000 workers. Gasoline prices were up and buying power was down. General Motors was virtually out of cash to pay its bills and Chrysler was not far behind. In November 2008, the New York Times ran the headline "GM teetering on bankruptcy, pleads for federal bailout."
The Center for Automotive Research, an independent research group that gets some funding from automakers, predicted harsh outcomes if GM and Chrysler went belly up. Beyond the immediate jobs lost, there would be a partial collapse of the supplier industry that would lead to a 50 percent drop in
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