Bloomberg News

Obama Leverages Auto Bailout for Crucial Midwest Wins

November 07, 2012

Obama Leverages Auto Bailout for Midwest Wins Key to Victory

U.S. President Barack Obama speaks at Scott High School in Toledo, Ohio. Photographer: J.D. Pooley/Getty Images

Clarissa Wright says Barack Obama’s decision to bail out the U.S. auto industry gave the president the edge he needed to win Ohio, and ultimately, re-election.

Wright, 36, who operates a state-subsidized day care center in East Liverpool, Ohio, near the Pennsylvania and West Virginia borders, says the president needs more time to undo the damage to the economy she blames on his predecessor, George W. Bush.

“I love Obama, I really do, and I think he’s had a rough time of it,” she said. “The auto bailout helped Ohio a lot and I think it was a good thing for the country.”

Support in Ohio for the bailout helped Obama to a victory yesterday in the state, which together with Michigan has about 65 percent of General Motors Co. (GM:US) and Chrysler Group LLC’s factories. A projected Ohio win for Obama shortly after 11 p.m. New York time and a win in Oregon pushed the president over the required 270 electoral votes, according to the AP.

Without the auto bailout, Ohio would most likely have been leaning in favor of Republican challenger Mitt Romney the last several months, said Peter Brown, assistant director of the Quinnipiac University Polling Institute. While Ohio typically is slightly more Republican than the rest of the country, this year it’s been slightly more favorable to the Democratic incumbent, he said. Every successful Republican presidential candidate has won in Ohio.

“It’s an aberration that benefits Obama,” said Brown, whose polls showed the president with an edge in Ohio throughout this year.

Ohio Rebound

Obama rode the popularity of the car companies’ rescue, optimism about jobs from shale oil production and the results of a rebound in Ohio engineered by Republican governor John Kasich and the state’s legislature, Brown said.

“One of those he created, one was done by his GOP opponents and the other is the result of the oil and gas industry, a group he hasn’t been all that supportive of,” Brown said.

Pew Research Center polling this year found that 56 percent of Americans considered the bailout of Chrysler and GM good for the U.S. economy. Obama’s running mate, Vice President Joe Biden, frequently quipped from the campaign trail that his ticket deserved re-election because “Osama Bin Laden is dead and General Motors is alive.”

Managed Bankruptcy

President George W. Bush, a Republican, gave GM and Chrysler emergency loans in late 2008 to keep them alive long enough for Obama, a Democrat, to craft the $80 billion rescue plan that included the 2009 firing of GM Chief Executive Officer Rick Wagoner and the managed bankruptcy of both carmakers. At the time, 54 percent of Americans said the bailout was bad for the economy, according to Pew.

Marcia Elrick, 66, credits Obama’s decision to rescue the industry with her family’s good fortune over the past four years. Her two sons kept their jobs and her daughter’s husband had secure employment, the retired resident of Concord, Ohio, said.

“I thought everything he did was great,” said Elrick, a lifelong Democrat. “The bailout had a great impact on all the smaller companies around here that rely on the auto industry. Ohio was suffering and that really helped.”

Romney has battled the perception, fueled by a 2008 New York Times op-ed column he wrote, that he wouldn’t have rescued the auto industry. Romney has said he favored a managed bankruptcy with government loan guarantees instead of direct loans.

‘Didn’t Help’

“Mitt Romney is a car guy, if there was ever a candidate who was tied to the auto industry, it should have been him,” said Rick Czuba, CEO of Glengariff Group Inc., a Chicago-based market research firm.

“If it hadn’t been for his opposition to the bailout, auto state voters would have given him a really good look, but those kinds of missteps really hurt him,” he said. “Pennsylvania, Michigan, Ohio, Wisconsin and Iowa are always battleground states and that didn’t help him there in the long run.”

Romney has been attacking Obama’s auto rescue over the past few weeks in Ohio. A Romney TV ad with a theme that auto jobs were going overseas debuted last weekend and appeared more than a dozen times each in the Toledo and Youngstown markets, according to Kantar Media’s CMAG, a New York-based ad tracker.

The 30-second spot shows cars being crushed as a narrator says Obama “sold Chrysler to Italians who are going to build Jeeps in China. Mitt Romney will fight for every American job.” Fiat SpA (F), Chrysler’s majority owner, is based in Turin, Italy.

Hilliard Stop

The Washington Post and PolitiFact.com were among media outlets that said the commercial was misleading. GM and Chrysler each responded with statements that they are adding jobs in both the U.S. and China and not shifting work overseas. Romney blamed his initial China comments on a Bloomberg story, which he said was inaccurate. Chrysler said the story was accurate and that it had been misinterpreted.

Obama himself took Romney to task during a Nov. 2 campaign stop in Hilliard, Ohio.

“I understand that Governor Romney has had a tough time here in Ohio because he was against saving the auto industry,” Obama told the crowd. “And it’s hard to run away from that position when you’re on videotape saying the words, ‘Let Detroit go bankrupt.’ And I know we’re close to an election. But this isn’t a game. These are people’s jobs. These are people’s lives.”

Sales Revival

The auto industry has had plenty of good news in the waning days of the campaign. GM’s and Ford’s North American operations earned a combined $11.95 billion in pretax profit this year through September, the companies said last week, pushing their shares to the highest level since April. Chrysler, which generates almost all of its revenue in North America, reported $4.1 billion in modified earnings before interest, taxes, depreciation and amortization.

U.S. light-vehicle sales have risen 14 percent this year through October, and Ford said they are on pace for about 14.5 million this year, the best since 2007, the year before Obama was elected. Autos contributed 18 percent of the 2.2 percent average rate of growth for gross domestic product in the recovery that began in the third quarter of 2009 to the second quarter of 2012, according to data from the Commerce Department.

Ed Wagner, a 64-year-old postal worker from Columbus, said Obama and the federal government had no choice but to help prevent Chrysler, and especially GM, from failing.

“I think that GM would have gone under, and I don’t think you can allow that to happen,” Wagner said in an interview after voting at the Westgate Recreation Center in Columbus, near where a Delphi Automotive plant once operated.

7% Unemployment

Unemployment, which peaked at 10.6 percent in Ohio in January 2010, fell to 7 percent in September 2012. In Michigan, joblessness fell from a 14.2 percent high in August 2009 to 9.3 percent in September. Auto jobs have increased about 15 percent in Ohio and 33 percent in Michigan from July 2009, when GM was emerging from bankruptcy, through September, according to the U.S. Bureau of Labor Statistics. Unemployment is now lower in Michigan and Ohio than when Obama took office.

“Obama was sure to overwhelmingly win the auto vote, even if 30-40 percent of the union members were fairly conservative on issues like abortion and hunting,” said Brian Pannebecker, 53, an auto worker at Ford Motor Co. (F:US)’s Sterling Axle plant in Sterling Heights, Michigan, who supported Romney. “That’s the message they get brainwashed with from the union.”

Romney attacking Obama’s auto rescue over the last few weeks was a big gamble, said pollster Czuba.

“Voters in Michigan and Ohio like Chrysler and GM,” he said.

‘Big Plus’

Bob Beard, 67, a retired state government worker from Columbus, said the auto bailout was “a big plus” in his support for Obama and that the issue hurt Romney in the state.

“It boosted Ohio’s employment and economy, and it was a good and necessary thing to do,” Beard said in an interview after voting for Obama at the Westgate Recreation Center.

While Republicans have also pointed out that salaried workers at Delphi lost parts of their pensions as a result of the bailout, Beard said that was an attempt to “gin up animosity toward the president” and that more workers would have suffered without the bailout.

Wright also said she thinks the attacks on the auto industry bailout were a big mistake in Ohio. Even after Wright’s husband lost a job as a grinder for oil industry equipment parts in May and had to accept a part-time job, cutting his income in half, the family’s support for Obama didn’t waver, she said.

“I don’t blame Obama for that because anyone after Bush would have had the same situation,” said Wright, who cast her first vote for Bill Clinton and has always supported Democrats. “I don’t like Romney’s attitude. I think Obama better understands people like me.”

To contact the reporters on this story: Jeff Green in Southfield, Michigan at jgreen16@bloomberg.net; Mark Niquette in Columbus at mniquette@bloomberg.net

To contact the editor responsible for this story: Cesca Antonelli at fantonelli@bloomberg.net


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