It’s Obama’s Auto Industry—But Not For Much Longer

It’s Obama’s Auto Industry—But Not For Much Longer  

President Barack Obama took to the Detroit auto show today for a victory lap around the industry his administration saved in the depths of the financial crisis. There’s no doubt that the American car business today reflects the goals Obama set seven years ago. Detroit automakers enjoy record sales and huge profits, while employing more workers and building more efficient models.

The question now is: How long will it last? 

During his visit, Obama noted how unpopular his plan was at the time: putting General Motors and Chrysler through bankruptcy in 2009, merging Chrysler with Fiat and spending $50 billion to save GM. (All told, the U.S. government pumped $80 billion into the auto sector and got back roughly $70 billion).

“In exchange for help we demanded responsibility. The industry retooled and restructured, everybody sacrificed and everybody put some skin in the game,” Obama said in his speech at a UAW-GM training center. “I could not be prouder of this industry and the road we traveled together," 

When Obama announced his plans for GM and Chrysler in March 2009, their futures were in the balance. Both were running entirely on government loans; the financial crisis had scared every other investor away. While GM was too big to fail, Obama’s auto task force had an intense argument over whether it should keep Chrysler open or shut it down, folding the best parts into GM.

Obama himself chose to keep Chrysler open, pending a deal with Fiat. In announcing the rescue plans that March, the president said his goal was “an auto industry that is once more out-competing the world; a 21st century auto industry that is creating new jobs, unleashing new prosperity, and manufacturing the fuel-efficient cars and trucks that will carry us towards an energy-independent future.”

“I am absolutely committed to working with Congress and the auto companies to meet one goal,” Obama said. “The United States of America will lead the world in building the next generation of clean cars.”

Seven years later, a fair assessment would say most of those goals have been met. When he tours the floor of the Detroit auto show today, Obama will pass by new electric or plug-in hybrid models from each of Detroit’s Big Three—the Chevrolet Bolt, the Ford Fusion and the new Chrysler Pacifica. 

All have made gains toward more efficient vehicles since the 2009 recession, from Ford’s twin-turbo V-6 pickups to Chrysler’s 9-speed transmissions. GM and Ford will soon report 2015 earnings totals that come close to or surpass records. Fiat Chrysler, the company the industry had given up on, now employs roughly 78,000 workers in North America.

U.S. automakers and their suppliers now employ 929,400 workers, a growth of nearly 50 percent since their lowest point in June 2009. But for all the success that Obama can tout today, not all of his goals were met.

Back in 2008, Obama vowed to push for 1 million electric and plug-in hybrid vehicles on American roads by 2015, backed by billion of dollars in government incentives. The actual total since then: 411,130 as counted by HybridCars.com, less than half the target. 

Already, automakers are warning that future fuel economy rules will be tough to hit as long as oil costs remain near record lows. The EPA estimates that the average fuel economy of new cars sold in 2015 was flat with the year before, as trucks and SUVs once again surged over smaller cars and hybrids; GM’s corporate average fuel economy is expected to decline year-over-year in 2015 due to a booming pickup business.

Those sales have also undone some of Obama’s work on jobs. A key part of the GM/Chrysler bailout required building small and fuel-efficient models in the United States rather than relying on trucks and SUVs to support American jobs. GM and Chrysler made those investments—such as GM assembling the Chevy Spark in the northern Detroit suburbs—and through pressure from the UAW, Ford followed suit.

That will not hold true for much longer. The most recent UAW contract with Ford ratified last fall lets the automaker move Focus production to Mexico while giving the Michigan plant where it had been built a new line of small pickups and SUVs. Fiat Chrysler’s new UAW contract allowed even more models—the Chrysler 200 sedan, Dodge Dart compact and a new Jeep SUV—to shift to Mexico in favor of truck production in the United States. (Building a fuel-efficient version of the Dodge Dart in the United States was a key requirement for Fiat Chrysler’s aid from the Obama administration.) And GM’s stand at the Detroit show will feature the Buick Envision, the first mass-market car to be imported from China to the United States; GM will also import a plug-in hybrid version of the Cadillac CT6 sedan.

UAW officials and workers agreed to these changes in large part because they unwound another feature of the Obama administration’s bailout—the two-tier pay system that paid new workers far less. That move made Detroit’s workers far more cost-competitive with foreign automakers’ workforces in the United States, and saved each automaker billions of dollars a year, especially Fiat Chrysler. The new contracts bring those workers up to parity—just as some analysts worry that the market for new vehicles in the United States may have peaked.

Obama’s moves remain wildly popular within the industry itself; after joking that he’d come to the Detroit auto show to do a “little browsing” for his post-presidential ride, workers at his speech Wednesday started shouting out models he should consider. (Obama confessed a soft spot for the Jeep Grand Cherokee, the first new vehicle he ever bought.) All three Detroit automakers and their major suppliers have far more strength to survive a shock or economic downturn than they did eight years ago while holding onto far more employees. But it will take just such a trial to show how many of the changes Obama required of Detroit were built to last.