Obama’s Claims About Auto Jobs Conflict with Some Government Data

December 2, 2010 - 9:01 PM

Obama campaigns

President Barack Obama. (AP Photo/Susan Walsh)

(CNSNews.com) – President Barack Obama and administration officials have boasted about how their policies have revived the U.S. auto industry, pointing to the successful initial public stock offering by General Motors on Nov. 18.

However, some of the touted job growth could be questionable based upon a government report last summer that says the rapid pace of dealership closings put “tens of thousands” of workers in immediate jeopardy.

Further, the auto plan lacked "any explicit cost savings to the manufacturers" according to the report by the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) from July.

Moreover, the administration’s claim of 75,000 jobs saved by the auto bailout does not differentiate the jobs growth in the industry as a whole and the job growth in both General Motors and Chrysler, the two firms that got $82 billion out of the $700 billion TARP pie.

“So here’s the lesson. Don’t bet against America,” Obama told a crowd at a Chrysler plant in Kokomo, Ind., prior to Thanksgiving. “Don’t bet against the American auto industry. Don’t bet against American ingenuity. Don’t bet against the American worker. Don’t bet against us.”

Vice President Joe Biden also told the Kokomo crowd that the administration insisted that the U.S. auto industry be competitive.

“To bring Kokomo back, to bring the automobile industry back, we knew we had to change things,” Biden said. “We couldn’t just keep doing the things the way we did. We knew the auto industry had to get leaner, had to get tougher, had to be more competitive. And we insisted that they did. And now you see the result -- an old industry adapting to a whole new era, competing again, leading again, and most importantly, hiring again. Hiring again.”

The government-supervised closing of GM and Chrysler dealerships led to significant job losses, according to Neil Barofsky, the special inspector general of TARP. Chrysler and GM offered more modest dealership closing plans -- and would have had to do so under a normal bankruptcy -- but not like the rapid closing of 25 percent of their dealerships as the government required.

Joe Biden

Vice President Joe Biden. (CNSNews.com/Penny Starr)

“The number and speed of the terminations was not necessarily critical to the manufacturers’ viability,” Barofsky’s report said.

The National Auto Dealers Association projected the closings would cost 110,000 jobs.

Charles Cyrill, spokesman for the National Auto Dealers Association, told CNSNews.com that there are no updated numbers since the SIGTARP report, and referred to the report.

The Inspector General’s TARP report said manufacturers disputed that job-loss number. But the report added, “It is clear that tens of thousands of dealership jobs were immediately put in jeopardy as a result of the terminations [of dealerships] by GM and Chrysler.”

The SIGTARP report also said, “Job losses at terminated dealerships were apparently not a substantial factor in the auto team’s consideration of the dealership termination issue.”

“It is not at all clear that that the greatly accelerated pace of dealership closings during one of the most severe economic downturns in our nation’s history was either for the sake of the company’s economic survival or prudent for the sake of the nation’s economic recovery,” the report said.

Obama also recently said, “Our automakers are in the midst of their strongest period of job growth in more than a decade. Since GM and Chrysler emerged from bankruptcy, the industry has created more than 75,000 new jobs. For the first time in six years, Ford, GM and Chrysler are all operating at a profit.”

Biden, again on Tuesday last,  said, “Mr. President, I know you know this, but the last year of the last outfit we succeeded, they lost 461,000 automobile-related jobs. And so far we’ve created almost 75,000 new jobs, and a lot more to come.”

But the 75,000 number apparently is used as to not differentiate from jobs created because of the GM and Chrysler bailout and American jobs created by foreign car companies, or by Ford, the only U.S. car company that did not take bailout money, said John Berlau, director of the Center for Investors and Entrepreneurs at the free-market Competitive Enterprise Institute.

Chrysler plant, Jeep, car, auto

In this May 21, 2010 file photo, the 2011 Jeep Grand Cherokee rolls off the assembly line at the Chrysler Jefferson North Assembly Plant in Detroit. New models and Labor Day promotions didn't do much to fire Americans' appetites for new cars in September. Still, auto executives expect a modest recovery for the remainder of the year. (AP Photo/Carlos Osorio, file)

“BMW has added 1,000 jobs in South Carolina,” Berlau told CNSNews.com. “The president has bashed Toyota and now uses its numbers to attribute to auto industry job growth. It’s misleading to say the industry and try to attribute that to the bailout.”

The 75,000 estimate is similar to that of the Bureau of Labor Statistics numbers, which only refers to employment in “motor vehicles and parts” and has no distinction between companies, foreign or domestic. The industry’s low point was in June 2009, with 626,100. For October 2010 the number was 686,900. That’s even lower than the high point for this year in July 2010 of 704,600 jobs. That would be an increase of 78,500 jobs during that time period for the entire industry operating in the United States – as measured by the BLS – not just for GM and Chrysler.

Berlau cited stories by CNN and National Public Radio that paraphrased the president as saying GM and Chrysler added 75,000 jobs.

“It is almost as if they wanted the media to mistakenly attribute this to GM and Chrysler,” he said.

Considering the apparently skewed job estimates and the dealership closings, the auto bailout might have caused net job losses for the country, Berlau said. He said that under a normal bankruptcy, dealership employees would have gradually found employment with Ford or foreign companies operating in the United States. But rapidly closing 25 percent of the dealerships in four months cast many people into unemployment.

Austan Goolsbee, chairman of the President’s Council of Economic Advisors, said the dramatic turnaround of GM was evident from the $50 billion initial public offering in mid-November, a vote of confidence from investors, after the company had lost $80 billion in the four years preceding its bailout and bankruptcy.

Goolsbee stressed that the alternative to the bailout would have been liquidation.

“Rather than hundreds of thousands of people around the country going out to look for new work, they got back to work at GM plants, dealerships, auto suppliers all around the nation,” he said in a White House video. “And in a number of cases, there have actually been plant expansions, added shifts and extra work.”