Only in our current hyper-partisan political environment – where everything must be run through an ideological wringer – could the saving of an entire American industry become such a political football.
Of course, I’m talking about the financial rescue of GM and Chrysler – which was in essence the rescue of the entire industry. Innovation Ohio’s policy staff has tracked the growth of auto industry jobs in Ohio since mid 2009 and the numbers – from the Bureau of Labor Statistics – tell us that more than 17,000 auto jobs have been added. This is the sort of statistic touted by the Obama Administration.
On the other side is Republican presidential candidate Mitt Romney. He famously penned an op-ed for the Wall Street Journal which argued against federal involvement in backstopping the auto industry. Rather than quietly move on from an issue that didn’t go his way – the rescue worked – he and Ohio Gov. John Kasich talk down Ohio’s recovering economy and the auto industry’s place in that recovery.
Dan Gearino of The Columbus Dispatch has written a well-reported, balanced piece on the raging debate over the auto rescue. What interested me in the story is what auto industry executives had to say about the rescue.
So, you’re skeptical about what defenders of the bailout have had to say about the inter-connectedness of the industry? Here’s what Honda of America had to tell Gearino:
Automakers that got no benefit — Honda, Ford, Toyota and others — either supported the auto rescue or had no formal position. Their rationale was that liquidation of a major company such as Chrysler or GM would send shockwaves through the companies that make auto parts, leading to a wave of bankruptcies. Many of those suppliers serve multiple automakers, leaving the remaining players to scramble for new sources of parts.
“Our position was quite consistent throughout, and it really stems from the fact that there is an integrated supply chain in this industry,” said Ed Cohen, Honda’s chief lobbyist in Washington. His company has 13,500 employees in Ohio.
Our suppliers “would have had a very difficult time maintaining our operations,” he said. “It would have had a devastating impact on a lot of them.”
Well, you say, you’ll grant that the stakes were high, but why couldn’t GM and Chrysler have simply done a regular bankruptcy reorganization with private financing? Here’s what auto execs told Gearino:
In the boardrooms of Chrysler and GM, there appeared to be no doubt about the policy. Bob Lutz, vice chairman at GM during the auto rescue, thinks the political debate is largely based on a misunderstanding of what happened. He scoffs at critics who say GM and Chrysler should have gone through a more traditional bankruptcy, one that would have involved private financing.
“Of course we went to the banks to see about refinancing,” said Lutz, who is now retired from GM. “The banks said, ‘Don’t look at us. We’re broke, too.’ Everybody forgets that.”
Sergio Marchionne, CEO of Chrysler, said during a talk in Columbus last week that it “would have been impossible” to do an orderly bankruptcy with private money.
“Nobody would have bet a dollar on our survival,” he said.
There was no policy playbook in place for what happened to our economy in 2008 and the first half of 2009. It’s easy to second guess a lot of decisions that were made during the financial crisis by both the Bush and Obama administrations. One thing you can’t second guess or change is facts. And the facts tell us that the auto rescue worked.