Who Should Get Credit for Detroit’s Resurgence?

Obama visits Chrysler in Toledo

Last week the White House put up a blog post and a report claiming the Obama intervention and subsequent bailout were not only the right decisions, saving perhaps a million jobs, but have been instrumental in Detroit’s turnaround.

I think, as I’ve said before, that the forced bankruptcy and bailout (the B&B) were clearly the right decision. Some people got screwed (as happens in bankruptcy), many more benefited and an economic disaster was averted—at least for the time being.

Obama toured a Jeep Wrangler plant in Toledo, with much fanfare, and Tim Geithner, in an op-ed, and Joe Biden, on the stump, kept the hype rolling.

Reactions to this have been predictably partisan and strangely mild. The Republicans have let Mitt Romney take the lead and make a fool of himself in the process.

He tried to explain on CBS (even though he had at first opposed the whole thing!) why the bankruptcy was originally his idea, adopted by the Obama administration, but that we didn’t need to spend billions of reconstruction dollars.

As the presumed Republican front-runner, Mitt has proved he will say anything, twist any argument, distort his past, and alter his positions repeatedly to pander to the voters. He presents himself as Mr. Business, but no one is buying this, because his prescriptions are simply the same old snake oil: The rich will create jobs if we cut their taxes and allow them to feed off the rest of us.

The Obama case is usually put in terms of jobs saved or created. Since emerging from bankruptcy, GM and Chrysler have added 115,000 jobs and created or saved nearly 20,000 more.

Loans are being repaid, and Chrysler announced it would buy the government’s remaining 6.6 percent stake, thus freeing it of any federal oversight.

But finally, the pitfalls ahead for the auto industry are basically the same as those facing the entire U.S. economy. As more and more people do less and less work in our flaccid economy with more cheap-labor jobs exported, and as cheap goods are imported while our manufacturing and service economies continue to languish, we can hardly expect our terrible unemployment numbers to improve.

GM plant in China

GM plant in China

We will soon be at the point where other countries won’t buy our debt. It’s exactly what happened to the U.S. auto industry a few years ago. Alice Schroeder in Bloomberg outlines some of these broader changes and compares us, after a fashion, to the “bread and circuses” the rulers of Rome grew to depend on to placate their people.

Henry Ford made sure that he paid his people enough in wages that they could afford to buy the cars they made. Despite all the crowing over the success of the B&B, we seem to be doing the opposite. How much more bread will it cost us to keep the auto industry afloat?

Is the auto industry really on a good path, finally? Or is it still echoing some of the other symptoms of our economically sick society?


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  1. What resurgence? If you owed millions of dollars and had several homes ull of expensive furniture and electronics, luxury cars, a few airplanes and closets full of designer clothes, and owed far more than you could ever repay, and suddenly got to keep all of it as well as having your debts dismissed, would you have a resurgance? What Chrysler and GM are experiencing now is simply their sitting on a pile of cash stolen from investors, employees, retirees and suppliers. Their quality is better, yes, but still large segements of the population will not buy their products and have a negative perception of these companies and how they are run. What they will do is exactly what got them in trouble in the first place— piss away money developing niche products that don’t sell well, pour money into questionable ventures and acquisitions and R&D that they never use, and continue to alienate their customers and employees with crooked dealers and questionable marketing.

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