LORDSTOWN, Ohio – The plant here that builds the Chevy Cruze is running three shifts now, but Glenn Johnson remains haunted by a nightmare vision of what could have happened if President Obama hadn’t used taxpayer money to bail out the auto industry in early 2009.
“Most of GM would have shut down,” said Johnson, 56, president of United Auto Workers Local 1112 at the plant, which employs 4,500 workers. “Then a Bain Capital would have come in and spun off parts of what was left and sent the rest overseas.”
“We would have been just another statistic,” Johnson said – and under that scenario, the GM Tonawanda Engine Plant, which employs about 1,000, would have been endangered, too.
Then again, in Dayton, Ohio, Tom Rose suffers a nightmare vision every time he gets his pension check, which is 40 percent smaller than he expected.
Rose blames that fact on the auto bailout, which, he said, put union members before salaried retirees such as himself.
“The UAW had the political clout, and we didn’t,” said Rose, 66, one of upward of 20,000 Delphi retirees – including 750 in Western New York – who lost part of their pensions while GM made UAW retirees whole. “It’s just that simple.”
Of course, there are many more auto industry workers in this perennial swing state than there are Delphi retirees, and that may help explain why Obama is clinging to a narrow lead here over Republican Mitt Romney.
Yet the same auto bailout that has helped revive the Ohio economy also throws a monkey wrench into the arguments that both candidates are making on the economy.
Four years after penning a column headlined “Let Detroit Go Bankrupt,” Mitt Romney says government needs to get out of the way to make business thrive – even though the nonpartisan Center for Automotive Research says that if Washington hadn’t rescued the auto industry, 1.4 million auto industry jobs would have been lost.
And Obama touts the auto bailout as one of his great successes – even as Republicans point to an ongoing investigation into whether the administration made the politically powerful UAW a winner and the Delphi retirees losers in the deal.
On the brink of failure
Four years ago, the Big Three U.S. automakers seemed like certain losers.
GM and Chrysler had been struggling for years, and then, in the midst of the worst financial crisis since the Great Depression, Americans stopped buying cars.
That left GM and Chrysler starved for cash and on the verge of collapse. Parts manufacturers and Ford were imperiled as well because the industry is so intricately intertwined, Steve Rattner, the first head of Obama’s auto task force, said at a recent Center for American Progress discussion on the auto bailout.
The Bush administration gave GM and Chrysler $25 billion to keep operating into early 2009, but then the new president was faced with a huge decision.
He could rush GM and Chrysler through a quick government-supervised bankruptcy and give them the cash to keep operating.
Or he could follow the polls that showed deep public opposition to yet another government bailout and let GM and Chrysler go through the regular bankruptcy process – which, given the shortage of private financing at the time, could have resulted in the firms’ being liquidated.
At the time, Romney stood strong in opposition to a bailout.
“Without that bailout, Detroit will need to drastically restructure itself,” wrote Romney, the son of a former American Motors CEO, at the time in the New York Times. “With it, the automakers will stay the course – the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.”
But Obama decided to write a check – for $55 billion. And he’s glad he did.
“Now, when Gov. Romney said we should let Detroit go bankrupt, I said, we’re going to bet on American workers and the American auto industry, and it’s come surging back,” Obama said in last week’s presidential debate.
Indeed it has. Thanks to growth in Asia and successful new offerings such as the Cruze, GM has returned to profitability, as has Chrysler, while Ford has reported annual profits for three years in a row.
That success has echoed throughout the industry.
9,600 jobs since 2009
In metro Buffalo, for example, GM has announced a $425 million investment at its Tonawanda Engine Plant that could grow its employment by about 400 people, to 1,400, by 2014. Meanwhile, Ford is investing $136 million in its Hamburg stamping plant, which employs 650, a move that’s expected to boost employment there as well.
And in Ohio, where one in eight jobs is tied to the auto industry, things look especially bright. The auto industry has added 9,600 jobs in Ohio since June 2009 – a 14.7 increase, according to the Bureau of Labor Statistics. And the state unemployment rate is nearly a full percentage point lower than the nationwide rate.
UAW members at the GM Lordstown plant thank President Obama for it all.
“If it weren’t for Obama, I wouldn’t have my job,” said Jennifer Harker, 40, of North Jackson.
“We owe everything to Barack Obama,” said Bill Bowers, 67, chairman of the UAW retirees at Lordstown.
Sandy Kihm of Lordstown, 56, agreed, adding: “If he hadn’t done this, all of Ohio would have collapsed.”
It all adds up to a politically powerful argument for Obama’s re-election in this auto-dependent state, said William Angel, a political science professor at Ohio State University at Lima.
“It undermines the Republican argument that the government can’t do anything to help the economy,” Angel said.
Catering to the UAW
The trouble is, in helping the economy, the auto bailout especially helped members of the United Auto Workers.
UAW retirees got their full pensions guaranteed, while salaried retirees from Delphi, a onetime GM spinoff that had been in bankruptcy for years before the financial crisis, lost 30 to 70 percent of their pensions, along with their health benefits.
What’s more, longtime UAW workers didn’t have to take a pay cut under the bailout, even though such concessions are common at bankrupt companies.
The bailout would have cost $26.5 billion less if the UAW hadn’t received that special treatment, according to the Heritage Foundation, a conservative think tank that says the $23 billion loss taxpayers can expect from the bailout is due to the union’s end of the deal.
How and why all this happened remains a mystery that three congressional committees and the Special Inspector General for the Troubled Asset Relief Program are trying to unravel.
To hear Rattner, the former auto czar, tell it, GM had no choice but to treat the union rank-and-file well, even though it cut wages for new unionized hires and retirement benefits for the Delphi retirees.
Rattner said the auto bailout had to be completed quickly or the uncertainty hovering over the industry would have further damaged U.S. auto sales and made the problem even harder to solve.
“So did we give the union workers more than they would have gotten in case of liquidation? Of course we did,” Rattner said. “We needed them to come to work.”
One big question lingers, though: Did the UAW get special treatment because of political pressure from the Obama administration?
‘Thrown to the wolves’
Three former leaders of Obama’s Auto Task Force told a congressional committee this summer that no, they did not pressure GM into favoring the unionized workers.
But only at the hearing did the Auto Task Force members agree to be interviewed by the inspector general who is investigating the issue, who suspects something fishy.
The inspector general “believes that the Auto Task Force played a role in the pension decision,” Inspector General Christy Romero said in a May letter to Congress.
In light of all that, and their own experiences, many salaried retirees of Delphi have reached the same conclusion.
They believe the Obama administration lavished benefits on the UAW, a union with nearly a million active and retired members and a long tradition of activism on Democratic campaigns.
“We were thrown to the wolves,” said Mary Miller, 61, a Delphi retiree from Dayton. “It was a stunning abuse of power.”
Five Delphi retirees interviewed for this story all said they would be voting for Mitt Romney.
“I don’t think Obama is a leader who knows what he’s doing,” said Tom Green, 62, a Delphi retiree from Springboro, Ohio, who calls the auto bailout “cronyism at its best.”
Green said he’s had to go back to work because of the pension cut, and Roy Smith of Dayton said he’s “blown through” his 401(k) for the same reason.
“I did vote for Obama four years ago,” said Smith, 64. “I will not vote for him this year because of how he’s treated us.”
Rose said other salaried Delphi retirees, including some who earned less than union wages, have lost their homes. He echoed the Heritage Foundation report that called the deal “a UAW bailout” rather than an auto bailout.
“That’s the trouble with the government getting involved in this way,” said James Sherk, a senior policy analyst at the Heritage Foundation who co-wrote its study on the bailout. “It so naturally lends itself to political interference.”
Bailout could be edge
For Obama, the auto bailout also lends itself to political strength, at least here in Ohio.
Angel, the professor from Lima, and others think it may be one reason why Obama has maintained a lead in polls here even while his national standing has slipped.
And Obama’s strength in Ohio couldn’t be more important.
“If he can still win there, he’ll likely win the election,” said Dean Debnam, president of Public Policy Polling, which showed Obama with a 5 point lead last week.
Ohio is a remarkably reliable bellwether; it has sided with the winner in 26 of the last 28 elections.
And like the nation itself, Ohio now finds itself deeply divided. For proof, just listen to Carl Peterson and Charles Schumacher.
“Mitt Romney is for the high-class people,” said Carl Peterson, 32, a mechanical design engineer in Columbus who is originally from Buffalo. “He’d put business before the country.”
Meanwhile, Schumacher, an 84-year-old Amherst native and resident of Hilliard, Ohio, said of Obama: “The guy’s a Marxist. ... I despise the creep.”
Those passions carry over to the auto bailout, too.
“It was so important for Ohio,” said Doug Croom, 37, a Buffalo native who’s now an auto worker in Columbus. “So many people are working because of it.”
Most, if not all, independent experts said the government was the financier of last resort in the auto bailout. But Jack Lyons, an 83-year-old Columbus resident whose son Peter lives in East Aurora, disagreed.
“As a taxpayer, I object to this,” Lyons said. “I think the banks could have accomplished the same thing. But Obama wanted to help the union.”