Obama Making Sales Pitch for Auto Bailouts to Skeptical Voters

President Barack Obama arrived in the heart of the U.S. auto industry today on a mission to convince taxpayers that their investment in the bailouts of General Motors Co. and Chrysler Group LLC will bring a return.

Heading into a congressional election season in which polls show the public skeptical about the $84.8 billion rescue and anxious about economy, Obama is using the backdrop of Detroit- area plants owned by GM and Chrysler to promote what he says is an industry revival that has saved more than a million jobs.

Obama previewed the argument he’ll make in an interview broadcast yesterday.

“We are going to get all the money back that we invested in those car companies,” Obama said on ABC’s “The View” program. The industry’s resurgence “tells a good story” about the U.S. economic recovery, he said.

Many voters don’t see it that way now. A Bloomberg National Poll conducted July 9-12 that shows the federal assistance package to automobile companies is becoming less popular: 48 percent say they had become less supportive in recent months versus 17 percent who say they have become more supportive.

Steve Rattner, the former head of president’s automotive task force, said that perception is disappointing.

“It appears that those of us behind it haven’t succeeded in convincing people that it’s worked,” he said in an interview.

Re-Hiring Workers

Since GM and Chrysler exited bankruptcy a little more than a year ago, the industry -- including Ford Motor Co., which didn’t seek federal aid -- has re-hired 55,000 workers after shedding 334,000 in the year before.

“History will record that we did the right thing” by stepping in, Ronald Bloom, the administration’s senior counselor for manufacturing policy, said today in an interview on Bloomberg Television. The administration’s auto team was “asked to put together a tough-minded plan to put these companies back on their feet as fast as we could. So far, so good.”

All three U.S. car companies reported a profit for the first quarter of 2010, the first time that has happened since 2004. In addition, GM is poised to undertake an initial public offering this year, and Chrysler Chief Executive Officer Sergio Marchionne has said his company likely will do so in 2011.

Repayments

The administrations of Obama and his predecessor, George W. Bush, committed a total of $85 billion to rescue the automakers, aid suppliers and prop up the financing arms of GM and Chrysler. About $67 billion in loans and equity investments are still outstanding, according to administration figures.

White House press secretary Robert Gibbs said yesterday the government is “on the path towards” getting repaid the $59.4 billion committed to the companies by the Obama administration.

GM has already repaid $6.7 billion in loans and the U.S. stands to recoup tens of billions of dollars more when the company conducts an initial public offering of stock later this year.

“We’re hopeful that General Motors can go public later this year, and we’re hopeful that after that we’ll be able to move our shares out,” Bloom said. “At this moment we think things are going well.”

Staying Open

The stock offering is central to the government’s expectations of getting repaid. For the U.S. to recoup all of its $42.2 billion investment in GM, the company would have to be worth at least $66 billion and possibly as much as $80 billion, depending on when the government sells its stock. GM’s implied equity value is about $53 billion based on its bond price.

Obama stopped first at Chrysler’s Jefferson North plant, which the company makes the Jeep Grand Cherokee. The facility employed 2,134 in 2007, before the financial crisis and recession. It has 2,833 employees now, after the company added a second shift. The company today announced that its Sterling Heights, Michigan plant will stay open instead of closing in 2012. Chrysler plans to add a second shift and about 900 jobs there in the first quarter of 2011.

Marchionne is leading the president on the tour.

At the Hamtramck GM plant, Obama’s second stop, the president will be accompanied by GM Chairman and Chief Executive Officer Edward Whitacre. The facility is one of nine that GM decided to keep open during a scheduled summer shutdown. It had 1,789 workers before the crash and has about 1,100 now.

Ford Next Week

Obama is scheduled to stop at a Ford plant next week in Chicago, where the company is adding 1,200 jobs to produce its new Explorer sport-utility vehicle.

The visit to the GM plant provides Obama with an opportunity to highlight another aspect of his economic plan: investments in alternative source of energy. It’s there that GM will produce the Chevrolet Volt electric car, scheduled to go on sale later this year.

The president’s sales pitch is tempered by some sobering forecasts. While the industry has added 55,000 jobs since June 2009, auto manufacturing in Michigan is on a decline. A 2009 University of Michigan study found that the state would end up with 95,500 blue-collar auto manufacturing jobs by the end of 2011, compared with 172,350 in 2008. The state’s unemployment rate was 13.2 percent in June compared with the national rate of 9.5 percent.

While the president is putting the auto bailout on the list of his administration’s accomplishments ahead of the congressional elections in November, Republicans are using it as campaign tool to highlight what they say is the government overreaching and overspending.

Republican Critics

Obama used the “crisis at some of America’s great auto- making firms as an opportunity for government to extend its reach into industrial policy,” Senate Republican leader Mitch McConnell of Kentucky said last month.

“We’re not complaining here in Michigan,” said Sean McAlinden, economist at Ann Arbor, Michigan-based non-profit Center for Automotive Research. “If they do pay all of their money back, this will be one of the most successful industrial policy interventions in American history.”

----With assistance from Jeff Green and David Welch in Southfield Michigan and Jeffrey McCracken in New York, and Alison Fitzgerald in Washington. Editors: Joe Sobczyk, Robin Meszoly

To contact the reporters on this story: Kate Andersen Brower in Washington at kandersen7@bloomberg.net; Nicholas Johnston in Washington at njohnston3@bloomberg.net

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