Obama Says Government Bailout Aid Saved Auto Industry From ‘Free Fall’

President Barack Obama said the bailout of the auto industry has been vindicated by the resurgence of Chrysler Group LLC and General Motors Co. (GM) and the addition of jobs making vehicles across the country.

Speaking at a Chrysler plant in Toledo, Ohio, that he called “the economic rock of the community,” Obama said he refused to let the industry sink in an “uncontrolled free fall” during the recession, an outcome that would have had effects that rippled nationwide. Now “this industry is back on its feet, repaying its debts, gaining ground,” he said.

The economy still faces challenges and “headwinds,” Obama said, hours after the Labor Department reported that payrolls increased by a less-than-projected 54,000 last month and the unemployment rate rose to 9.1 percent from 9 percent.

Obama’s trip to Ohio today is his 14th as president to the battleground state that has backed every winning presidential candidate since 1964.

The stop at the Toledo plant, which assembles Jeep Wranglers, follows a week of White House publicity about the automotive revival. That included a May 28 radio address by Vice President Joe Biden and a June 1 White House report saying $80 billion of federal aid for the auto industry saved at least 1 million jobs at automakers and their suppliers and will cost taxpayers less than originally forecast.

Credit for Revival

The president is seeking to gain credit for the auto industry’s government-aided revival. Polls at the time showed the rescue plan for GM and Chrysler was unpopular and Republicans criticized it.

Workers should remember “the improbable turnaround that’s taken place here at Chrysler,” Obama told plant workers. “I want you to remember all those voices who were saying, ‘No, no we can’t.”

He cited last night’s announcement that Fiat SpA (F) and the U.S. Treasury Department have reached an agreement for the Italian auto company to buy the government’s remaining 6 percent stake in Chrysler for $500 million. Chrysler already has repaid $7.6 billion in U.S. and Canadian government loans.

The government ultimately will lose about $1.3 billion of the amount put into the automaker under Obama and former President George W. Bush, according to Treasury. A March Congressional Budget Office report said the total cost of the aid will be about $14 billion.

Loss of Industry

If the government hadn’t acted, Obama said, “by the time the dominos stopped falling, more than a million jobs, in countless communities, in a proud industry that helped build America’s middle class for generations, wouldn’t have been around any more.”

Republicans say the federal aid was unnecessary government involvement in private industry.

“The administration’s auto bailout is nothing to celebrate,” said Brendan Buck, a spokesman for House Speaker John Boehner, an Ohio Republican. “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, chairman of the Ohio Republican Party, said in a statement.

Toledo’s Recovery

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 (BTOHX) 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.

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.

Altogether, Chrysler has added almost 6,000 jobs since leaving bankruptcy, Shawn Morgan, a company spokeswoman, said in an e-mail.

To contact the reporters on this story: Kate Andersen Brower in Toledo, Ohio at kandersen7@bloomberg.net; Hans Nichols in Toledo, Ohio, at hnichols2@bloomberg.net

To contact the editors responsible for this story: Mark Silva at msilva34@bloomberg.net

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