Obama heralds success of auto bailout

DETROIT — The government's bailout of the auto industry sparked political hand-wringing about the end of capitalism and accusations that President Obama aspired to be chief executive of what critics dubbed "Government Motors."

After the president forced the firing of General Motors Chief Executive Rick Wagoner, Republican Sen. Bob Corker, R-Tenn., proclaimed Obama's actions "truly breathtaking" and said the government ownership roles at Chrysler and GM "should send a chill through all Americans who believe in free enterprise."

A year and a half later, some critics have retreated from their sharpest attacks as they watch the auto industry again turn a profit and begin adding jobs in cities such as Detroit.

Obama was welcomed with loud applause Friday by about 1,500 autoworkers in the plant that makes the Jeep Grand Cherokee. If his critics had won, he said, the plant would have been closed.

"If some folks had their way, none of this would be happening," he said, calling out the "leaders of the 'just-say-no-crowd' in Washington" and sparking boos when he added that "one of them called it the worst investment we could make."

There's no satisfying some bailout critics, and the auto turnaround is not enough to fix places such as Detroit, where 30 percent unemployment has ravaged the city like few others in the United States.

But as Obama trumpeted the industry's progress Friday, Corker refrained from saying the bailouts were bad for the country. He said the administration's methods were "heavy-handed" but took credit for helping to shape the bailout. He prodded the Obama administration to force the companies to lessen their debt and achieve a more favorable union agreement.

"The ideas we laid out there were followed through," Corker said in an interview. "I take some pleasure out of helping make that contribution."

Touring Chrysler and General Motors assembly plants near Detroit, Obama argued that his administration's unpopular $60 billion bailout of the two companies — essentially government-funded forced bankruptcies — was paying off.

New data on the bailouts back Obama's argument. He touted statistics that show 55,000 jobs added in the year since GM and Chrysler emerged from bankruptcy, as well as projections that the federal government will recoup at least the $60 billion spent for auto-industry relief on his watch, if not the $85 billion spent since the Bush administration.

The president also said the federal intervention had saved more than 1 million jobs and an industry that's central to America's sense of self-worth. "We would have lost what has been the heart and soul of American manufacturing, what has built a middle class not just here in Detroit but all throughout the Midwest, what has made us proud and has been a symbol of our economic power," he said.

From a personal standpoint, perhaps the most enjoyable moment for the president Friday came at the GM plant in Hamtramck when, after an uneasy nod from Secret Service agents, he gingerly slipped into the driver's seat of one of the first electric Chevy Volts, buckled himself in and haltingly drove no more than 10 feet, declaring the ride "pretty smooth."

It was only the second time since Obama accepted Secret Service protection as a candidate in 2007 that he'd driven, aides said. For a politician who's openly pined for the days when he could move about like an ordinary person, it was a stolen pleasure.

The auto-industry financing program, which began under the Bush administration, extended about $85 billion to General Motors, Chrysler, GMAC and Chrysler Financial. Ford didn't receive the government's financial help, but benefits from the strength of its counterparts and the rest of the supply chain.

Today, most of the government money is expected to be repaid, although the program's ultimate cost was estimated by the administration in March to be $24.6 billion. Administration officials predict that the expected loss will fall as the companies in which the United States has a stake grow in value.

General Motors is expected to have a public offering of stock as early as August; Chrysler's is expected next year. The government investments could be repaid then.

The president overstated the case when he said all three major U.S. carmakers are making profits.

Chrysler has yet to post a net profit since leaving bankruptcy protection in June 2009. The company had a first-quarter net loss of $197 million, but it made $143 million before interest and taxes. CEO Sergio Marchionne said the only reason the company is not profitable is because it must pay interest on government loans.

"I have money in the bank to cover that debt," he said. "We have enough cash to pay it all off. But you can't run a business without cash."

Meanwhile, even if the auto-financing program costs the government the $24.6 billion, letting General Motors and Chrysler collapse might have cost the government more, according to some analysts. The Center for Automotive Research in Ann Arbor, Mich., estimated the closures would have cost the government $27 billion in lost tax revenues, mostly from personal income tax, and about $10 billion for benefit payments such as unemployment.

"In the middle of the worst recession we've had in a long time, it would have been devastating," said Kim Hill, associate director of research at CAR.

The success of the program has earned acknowledgment from people like Corker, who says that without the auto-industry bailout, "Who knows what would have happened?"

Material from The Associated Press and McClatchy Newspapers is included in this report.