June 3 (Bloomberg) -- As President Barack Obama tours a Chrysler Group LLC assembly line in Ohio today, gaining political credit for the automobile industry’s government-aided turnaround may be as challenging as returning U.S. carmakers to profitability.
Obama’s trip to a Toledo plant that assembles Jeep Wranglers follows a week of White House publicity about the automotive revival, including a May 28 radio address by Vice President Joe Biden and a June 1 White House report saying $80 billion of federal aid for Chrysler and General Motors Co. saved at least 1 million jobs at automakers and their suppliers.
The president also will have some good news to deliver for taxpayers: Fiat SpA and the U.S. Treasury Department announced last night that they have reached an agreement for the Italian auto company to buy the government’s remaining 6 percent stake in Chrysler for $500 million.
Obama’s task is to persuade voters that, while recovery has been slow in coming, the recession would have been far worse without government action to keep GM and Chrysler in business, said Steven Rattner, the former head of the president’s automotive task force.
“It’s very hard to convince people of what would have happened if you didn’t do something,” Rattner said. “People hate bailouts. They are angry about a lot of things and it’s a knee-jerk reaction, without a substantive foundation.”
Making his 14th trip as president to Ohio, a battleground state that has backed every winning presidential candidate since 1964, Obama will point to the creation of 115,000 auto industry jobs since GM and Chrysler left bankruptcy and rising market shares at GM and Chrysler. Ford Motor Co., which didn’t take a federal bailout, posted its biggest annual profit in more than a decade.
Ohio’s jobless rate was 8.6 percent in April, below the nation’s 9 percent rate. Next door in Michigan, 10.2 percent unemployment reflects a drop of almost 4 percentage points since September 2009. The U.S. unemployment rate for May will be released today.
Obama will stress that the auto industry accounts for only a portion of 250,000 new manufacturing jobs since December 2009, Ron Bloom, the White House adviser for manufacturing policy, said at a briefing.
“The automobile industry is a story of manufacturing, but there’s a broader manufacturing story as well that we think needs to be brought to attention,” he said. While the future isn’t guaranteed, federal aid for GM and Chrysler gave the U.S. auto industry a “real chance of success,” Bloom said.
Republicans say the federal aid was unnecessary government involvement in private industry.
‘Nothing to Celebrate’
“The administration’s auto bailout is nothing to celebrate,” said Brendan Buck, a spokesman for House Speaker John Boehner, an Ohio Republican. “There were better options that could have saved jobs for these workers. The model the White House should be touting is Ford, which, instead of relying on a taxpayer-funded bailout, saw trouble coming and made the tough decisions necessary to preserve jobs and weather the storm.”
“Unemployed workers in Ohio aren’t looking for a presidential victory lap, they need jobs,” Kevin DeWine, the chairman of the Ohio Republican Party, said in a statement.
In Toledo, where GM last week said it would add 200 jobs, the economy is on the mend, Mayor Michael Bell said. The Bloomberg Toledo Index of 33 companies, designed to measure the local economy, has risen 11.5 percent in the past year.
“Toledo is on the upswing,” Bell said. “Are we still hurting? Yeah, but we are a little bit better off than a couple of years ago.”
Transportation-equipment manufacturing employment in metropolitan Toledo has more than doubled to 8,200 from 3,400 in June 2009, according to the Bureau of Labor Statistics. As recently as June 2008, transportation equipment jobs topped 11,000.
For Obama to win Ohio next year, more job gains are likely needed, said Bell, who ran as an independent. “In the city of Toledo, he’d probably still be OK,” he said. “As far as the rest of Ohio, if you get too much past 7 percent, he may have an issue.”
The White House’s June 1 report on the auto industry highlighted employment at plants in Ohio, Indiana and Michigan - - battleground states that Obama carried in 2008 and that will be important to his re-election chances in 2012.
At Chrysler, where the Toledo plant produces 200,000 cars a year, U.S. market share rose to 10.9 percent last month from 8.5 percent in May 2009, when the automaker was under bankruptcy- court protection, according to Autodata Corp., an industry researcher based in Woodcliff Lake, New Jersey.
‘Well On Their Way’
Altogether, Chrysler has added almost 6,000 jobs since leaving bankruptcy, Shawn Morgan, a company spokeswoman, said in an e-mail.
“They’re not out of the woods yet, but they are certainly well on their way to recovery,” Rebecca Lindland, an industry analyst with IHS Automotive, said in a telephone interview. Chrysler probably wouldn’t have survived without the bailout, she said. “We definitely would’ve had a significant failure had they not bailed them out.”
The government so far has gotten back about $40 billion of the $80 billion taxpayers provided to stabilize the auto industry, according to the June 1 White House report. Bloom said that losses ultimately will be about $14 billion, down from $48 billion forecast in 2009, citing a Congressional Budget Office report.
Chrysler Group LLC on May 24 announced that it has repaid $7.6 billion in U.S. and Canadian government loans. As part of its agreement with Treasury, Fiat is also purchasing, for $75 million, the right to buy all of the shares in the Auburn Hill, Michigan-based automaker retained by the United Auto Workers retiree trust. The Treasury will receive 80 percent of those proceeds, or $60 million, with the remaining $15 million going to the government of Canada.
After Detroit-based GM’s initial public offering last November, the U.S. sold almost half of its GM common equity. The U.S. government now owns 33 percent of GM’s outstanding shares.
Since GM’s IPO at $33 a share, the stock has fallen more than 10 percent to $29.60.
Chrysler last month posted a first-quarter net profit of $116 million, its first since bankruptcy, and global sales during that period increased by 18 percent. GM reported its fifth straight quarterly profit as U.S. sales climbed 25 percent in the first quarter.
“Without the bailout, the auto industry would only be a shadow of what it is today,” said Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, who said he hasn’t done an in-depth analysis of the bailout. “It would have cost the economy tens of thousands of jobs in the industry and many other industries that depend on the auto industry.”
--With assistance from Kate Andersen Brower in Washington. Editors: Bob Drummond, Leslie Hoffecker
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