Rove Ignores The Realities Of The Auto Rescue

Blog ››› ››› REMINGTON SHEPARD

In his May 10 Wall Street Journal column, Fox News contributor Karl Rove misleadingly claimed that "[t]he auto industry bailout cost lots of Americans their jobs" and attacked President Obama for using "taxpayer money" to "restructure GM and Chrysler by fiat and then force them into bankruptcy." Rove also highlighted GOP presidential candidate Mitt Romney's business background to suggest that GM and Chrysler should've sought out and used private funds to save themselves.

But Rove's claims ignore both past and present realities.

Rove pointed to 2008 GM and Chrysler and affiliated car dealership employment numbers and claimed that the industry lost jobs in America because those numbers were higher than they are now. From the column:

The Obama administration, after all, forced General Motors and Chrysler into Chapter 11 bankruptcy in 2009 and then capriciously ordered thousands of local dealerships closed.

The auto industry bailout cost lots of Americans their jobs. GM employed roughly 252,000 workers in 2008. Now it has 207,000, with 131,000 of them working in foreign plants. The Detroit Free Press recently noted that fewer Americans work at Chrysler than did before the bankruptcy. Based on data from the National Automobile Dealers Association, I estimate that as many as 100,000 Americans lost jobs at the companies' dealerships.

The Bureau of Labor Statistics (BLS) provides a clearer picture:

The auto industry, after steadily hemorrhaging jobs, hit a 10-year low in June 2009. Starting in December 2008 and ending in June 2009, the federal government loaned the auto industry in total $85 billion. Shortly after the money was loaned, the auto industry began its recovery and steadily added more jobs with sales of the Big 3 automakers reportedly now "surging."

These sales in turn have resulted in more jobs for American workers. The Toledo Blade reported in a February 28 article:

Three years after the U.S. auto industry nearly collapsed, sales of cars and trucks are surging. Sales could exceed 14 million this year, compared with last year's 12.8 million.

The result: Car makers are adding shifts and hiring thousands of employees around the country.

Car makers and parts companies added more than 38,000 jobs last year, with industry employment averaging 717,000 in 2011.

Automakers have announced plans to add 13,000 more this year, mostly on night shifts.

[...]

The hiring is good news for communities around the country that lost hundreds of thousands of manufacturing jobs. Starting in 2005, GM, Ford, and Chrysler closed 28 factories and eliminated 88,000 jobs. Parts companies cut 234,000 other jobs.

Now, if sales hit 15 million by 2015, as some experts predict, the three Detroit automakers could hire 20,000 people more, said Sean McAlinden, chief economist for the Center for Automotive Research in Ann Arbor.

In northwest Ohio, Chrysler added about 50 employees last month to its Toledo Assembly complex Wrangler line to keep up with demand.

The hiring was in addition to a $500 million investment in the plant that Chrysler announced last year. That is expected to lead to more than 1,100 jobs, including the addition of a second shift at the plant. Chrysler also said it planned to invest $72 million in its Toledo Machining Plant.

GM announced plans for two investments totaling $343 million in its Toledo Transmission plant and a $47 million upgrade of its Defiance Powertrain plant. At the Alexis Road facility, also known as Toledo Powertrain, GM officials have said they expect to add as many as 650 jobs this year, including up to 150 in the first quarter. This is the first time in a decade that Toledo Transmission is hiring workers new to GM.

Rove also suggests that Obama was wrong to use "taxpayer money" to finance the auto rescue and juxtaposes this with Romney's previous experience in private equity:

There are differences between Mr. Romney and Mr. Obama. Mr. Romney rescued companies with private money collected from investors including union pension funds, college endowments and private individuals. He had to go through the normal process of laws and courts. His principal focus was on long-term growth for companies in which he invested his company's reputation and money. And he had to make a profit to be successful.

Mr. Obama's story is very different. The auto industry was bailed out with taxpayer money. The president restructured GM and Chrysler by fiat and then forced them into bankruptcy, presenting the courts with a fait accompli.

But the idea that the auto rescue could have been financed through private funds ignores what numerous experts have said: Private financing for the auto bankruptcies was impossible at the time. As Arthur Gonzalez, the federal judge who presided over Chrysler's bankruptcy hearings, said during a recent ABC News interview, "One thing is clear, without government support in one fashion or another, there were no sources of funding" for Chrysler.

Had the bailout not occurred - something that would've been likely had bankruptcy relied upon private financing that simply wasn't there - anywhere from 2.5 million to more than 3 million jobs could've been lost.

Rove concluded his column by claiming that "[i]f the auto industry bailout is the best Mr. Obama can do, Republicans should take heart." It appears Rove, like others in right-wing media, is seemingly in denial about the auto bailout.

Posted In
Economy, Jobs, Wages, & Unemployment
Network/Outlet
Wall Street Journal
Person
Karl Rove
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