Bloomberg News

GM Halted SUV-Making in Ryan’s Hometown Before Obama Took Office

August 31, 2012

In his speech accepting the Republican vice presidential nomination Aug. 29, Representative Paul D. Ryan of Wisconsin attacked President Barack Obama over the closing of a General Motors Co. (GM:US) factory in Ryan’s hometown. The only rub is that the factory stopped making GM vehicles while George W. Bush was still president.

The Janesville, Wisconsin, plant had employed about 1,200 union workers making full-size SUVs, GM said at the time. As truck sales fell in 2008, the Detroit-based automaker announced in October, while the presidential race was in full swing, that it would idle the plant that year. Two months later, before Obama was sworn in, GM halted most output at the plant, except for some low-volume Isuzu trucks.

GM received the first part of a government bailout under then-President Bush on the last day of 2008. Obama took office in January 2009.

“The Obama administration had nothing to do with any individual plant-closing decisions,” Steven Rattner, who headed Obama’s auto task force, said yesterday in an interview. “But in this case, it’s particularly egregious to suggest that the administration had any connection since this decision was made and announced before Barack Obama became president.”

Chronological facts notwithstanding, Ryan seized on the plant closing in his speech, linking it to the company’s subsequent bankruptcy reorganization that is now largely seen as a hallmark of the Obama administration.

‘Locked Up’

“Right there at that plant,” Ryan said Aug. 29. “Candidate Obama said: ‘I believe that if our government is there to support you, this plant will be here for another hundred years.’ That’s what he said in 2008. Well, as it turned out, that plant didn’t last another year. It is locked up and empty to this day.”

Ryan declined to revise his comments in an interview yesterday on CNN.

“Ryan blaming the president for a GM auto plant that closed under President Bush -- thought he was smarter than that,” Stephanie Cutter, an Obama campaign adviser, posted on Twitter during the speech.

Workers at the factory built about 95,600 GM SUVs -- Chevrolet Tahoes and Suburbans and GMC Yukons and Yukon XLs --in 2008 and 2,400 Isuzu trucks. The plant made 1,400 of the Isuzu models in 2009.

“It remains in standby,” Bill Grotz, a GM spokesman, said in a telephone interview about the Janesville plant. “Standby is synonymous with idled.” It means there are no plans for production at the plant in the “foreseeable future,” he said.

General Motors Corp. entered bankruptcy court protection on June 1, 2009, and the new General Motors Co. emerged on July 10, 2009. The U.S. Treasury and other owners sold $15.8 billion of common shares and the automaker sold $4.35 billion of preferred shares in a November 2010 initial public offering.

After Bankruptcy

Since bankruptcy, GM has announced more than $7.3 billion of investments for U.S. factories that retain or create 18,600 jobs, Grotz said. The company earned a record full-year net income of $9.19 billion in 2011 while surpassing Toyota Motor Corp. (7203) as the world’s top-selling automaker.

The U.S. government still holds more than 500 million shares of GM, acquired in the $50 billion bailout by the Obama administration. The stake is 32 percent of GM’s outstanding common stock (GM:US).

Even before bankruptcy, GM was trying to shed capacity. Since 2008, GM has closed five plants and placed three on standby status, including Janesville, according to Grotz.

Two of the standby plants have been given a reprieve. GM announced in 2009 that its Orion Assembly plant in Michigan would build a new small car, eventually named the Chevrolet Sonic, and last year the company said its factory in Spring Hill, Tennessee, would build the Chevrolet Equinox compact SUV beginning in the second half of this year.

Cuts Needed

“Everybody said -- Republicans and Democrats agreed -- we had too much capacity,” Arthur Schwartz, a former GM labor executive who left the company at the end of 2009. “When you reduce capacity, somebody gets hurt.”

Janesville was vulnerable because it was an old plant that would require a lot of investment to build a new product, he said.

The Janesville Assembly Plant was constructed in 1919 to produce Samson tractors. Chevrolet production began there in 1923, Grotz said in an e-mail.

Ryan Request

While Obama’s auto task force was working on the automaker’s prepackaged bankruptcy, Ryan called Rattner, who headed the team, to lobby on behalf of the Janesville plant, Rattner said yesterday in a telephone interview.

“We don’t get involved in those decisions,” Rattner said. “There was no desire to go punish the people of Wisconsin or Janesville. It was simply: Plants were closed all over the country and Janesville was one of them.”

While still a candidate, Obama commented on the plant being placed on “standby” by the company, saying in October 2008 that he would “retool” companies like the plant in Janesville. Ryan’s camp has used those words to push back against questions about the validity of the statement.

“The facts are clear: When the GM plant went on standby the president told the people of Wisconsin he would ‘lead an effort to retool’ it and restart production,” Brendan Buck, Ryan’s spokesman, said yesterday. “But when the bailout’s winners and losers were decided, Janesville ended up losing.”

To contact the reporter on this story: Tim Higgins in Southfield, Michigan, at thiggins21@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net


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