Analysis: Obama seeks lift from Detroit auto jobs

Thu Jan 12, 2012 7:52pm EST

Related Topics

(Reuters) - A year ago, the Obama administration suffered from a post-bailout hangover and kept a low profile at the annual Detroit auto show with a smaller U.S. industry just beginning to pull out of its worst-ever downturn.

But this year, the energized venue was a formal launching pad for what is arguably the chief economic accomplishment of President Barack Obama as he approaches the 2012 election - the resurgence of U.S. automakers made possible by government intervention.

"Had this administration sat on our hands, a bad recession could have become an even worse depression right away," Transportation Secretary Ray LaHood said at the auto show. "America's manufacturing sector would have spiraled into freefall."

LaHood was among four Cabinet-level officials in Detroit this week to look under the hood and kick the tires of a domestic sector that owes its continued existence to more than $100 billion in taxpayer assistance and other help extended in 2009 and 2010 to boost manufacturing, suppliers, auto finance companies and showrooms.

Much of that financing ran right through the Obama White House, which is aggressively highlighting new hiring, improved sales and profits at General Motors Co, Ford Motor Co and Chrysler with the 2012 campaign heating up.

The White House repeated much of what LaHood, Commerce Secretary John Bryson and Energy Secretary Steven Chu said on their visits to Detroit. The administration, however, did not celebrate U.S. job additions at foreign carmakers, which make up half of U.S. sales and who were heavily represented at the auto show.

The administration's first full press of the year on auto job creation also coincided with Mitt Romney's victory in the New Hampshire Republican presidential primary. Romney has emphasized his experience as a private equity investor who created jobs, but he has been critical of the auto bailout.

JOBS SAVED VS JOBS CREATED

While government influence at decade's end helped Detroit recover financially, the government-orchestrated bankruptcies of General Motors and Chrysler led to tens of thousands of direct factory, supplier and other related job cuts. The primary benefit of the U.S. industry restructuring for employment has been the balance of jobs saved rather than jobs created.

For instance, a collapse of General Motors in 2009 threatened to wipe out Chrysler and devastate Ford and their supplier and dealer networks. Combined, the three companies now employ 171,000 people in the United States, nearly two-thirds in Michigan.

That figure compares with 202,000 in 2008 and 1.2 million in 1978.

GM, Ford and Chrysler have created about 4,500 direct U.S. manufacturing jobs since the depths of their restructuring with new hiring in related supplier, dealer and service jobs far outpacing factory employment, according to the latest industry and government figures.

Carmakers have rationalized capacity and decreased labor costs, and can now be profitable at lower sales volumes. The U.S. industry overall is hiring, but cautiously.

Labor Department statistics show the sector overall added about 39,000 parts manufacturing and 11,000 vehicle assembly jobs last year, raising direct auto employment to 724,000. Auto manufacturing employment rose at a similar clip in 2010.

The industry also added 84,000 jobs at parts dealers and showrooms last year, illustrating the strong multiplier effect of manufacturing on related businesses in the auto sector.

U.S. auto companies and their suppliers are primarily based in Michigan, Indiana and Ohio, which are historically swing states in presidential contests. Romney, whose father, George, was a former Michigan governor and a chief executive of American Motors, has said the bailout of GM and Chrysler was not a good use of taxpayer money - a point Obama has taken pains to underscore in multiple visits to Midwest auto states.

Michigan added 2,300 vehicle assembly jobs in 2011 through November, Indiana was up 4,000 positions, and Ohio actually lost 300 of those jobs, according to the latest Labor Department figures on the breakdown of hiring in individual states. There were nearly 5,000 new parts manufacturing jobs created in Michigan last year and 1,500 in Ohio. Indiana lost 500 parts jobs.

The administration this week also paid scant attention to job creation by foreign automakers in the United States, who did not require any bailouts and who are also adding thousands of jobs. They are concentrated in the South, where Republicans have embraced their predominantly nonunion operations

In 2011, overseas companies added jobs in the United States.

Toyota Motor Corp opened a new plant in Blue Springs, Mississippi, adding nearly 2,300 employees. Honda Motor Co added shifts at two factories, creating more than 1,200 jobs, and Volkswagen added more than 1,600 jobs, mostly at its Chattanooga, Tennessee, plant.

Korea's Hyundai Motor Co added 100 full-time jobs in 2011 in Montgomery, Alabama, and Kia Motors Corp brought on 1,000 positions for a third shift at West Point, Georgia.

Alabama added an estimated 1,500 parts jobs while Kentucky, where Toyota operates in Georgetown, added 3,100 employees for parts manufacturing.

Bill Ballenger, editor of Inside Michigan politics, said the heavy manufacturing job loss in Michigan over the past decade has been a disaster but the auto recovery obviously has been a "big plus." Whether Obama gets credit for it, he said, still is an open question.

"Even in Michigan, some people say you're either for it or you're not," Ballenger said of the dramatic federal intervention. "It's a complicated thing, so far anyway."

(Reporting By John Crawley in Washington DC, editing by Matthew Lewis)

FILED UNDER: