Image: U.S. President Barack Obama tours a Chrysler Auto Plant in Detroit
President Barack Obama tours a Chrysler plant in Detroit Friday. Obama is in the heart of the U.S. auto industry to push an important election-year claim: that his administration's unpopular auto industry bailout has turned into an economic success. news services
updated 7/30/2010 3:03:49 PM ET 2010-07-30T19:03:49

President Barack Obama on Friday heralded the recent turnaround for U.S. automakers, arguing that thousands of jobs and increased production vindicate his unpopular decision to bail out the industry.

With Americans facing a still-limping economy and potentially pivotal congressional elections in three months, Obama is seizing on the positive new trends in the auto industry as evidence of broader economic good news. He launched an intensive campaign to highlight the story as a concrete area of improvement with direct ties to his administration's actions.

"This industry is growing stronger," Obama declared from the floor of Chrysler's Jefferson North plant, which recently added a second shift of production to the tune of about 1,100 jobs. "You are proving the naysayers wrong."

Separately Friday, Chrysler said it will add nearly 900 jobs at a factory in suburban Detroit. Its decision is a show of optimism that consumers will embrace its redesigned midsize sedans.

Chrysler said it would be profitable on a net basis if it were not for the interest costs of loans remaining from its bailout, the automaker's chief executive said on Friday.

Sergio Marchionne, who heads both Chrysler and its controlling partner Fiat SpA , also repeated that he expected Chrysler would launch an initial public offering in 2011 to cash out part of the stake held by a union trust fund.

From Chrysler's Jefferson North plant, where the president greeted workers making Jeep Grand Cherokees and sat in a mostly finished model, Obama went to nearby Hamtramck to visit a GM plant planning to assemble the Chevrolet Volt rechargeable electric car. That factory is one of nine the automaker will keep open during the usual two-week summer shutdown.

Taking advantage of a rare opportunity to drive, Obama got behind the wheel of a black Volt, buckled himself in and inched the car slowly forward about 10 feet, before declaring that the ride was "pretty smooth."

GM said Friday that it is boosting production capacity for its new Chevrolet Volt due to strong public interest in the electric car that goes on sale this year. It will now have a production capacity of 45,000 vehicles in 2012, up from previous plans for 30,000 vehicles.

The Volt, priced at $41,000, can go 340 miles on a single battery charge, according to GM. The vehicle is powered purely by the battery in the first 40 miles, and then uses a small tank of gasoline to create an additional charge for the remaining 300 miles.

Chevrolet dealers began taking orders this week for the 2011 model.

Obama will continue his autos tour next week when he visits the Chicago plant where Ford builds the Taurus sedan and plans to assemble a new Explorer sport utility vehicle. Hoping to ratchet up public notice further, the White House also had the administration's top auto officials brief reporters Thursday.

Following the government-led bankruptcies of GM and Chrysler, the companies have shown signs of improvement. Obama said that all three U.S. automakers are "operating at a profit, for the first time in six years."

But the claim that all three Detroit automakers are making money isn't quite true. GM and Ford are making money, but Chrysler has yet to post a net profit since leaving bankruptcy protection in June of last year.

The company had a first-quarter net loss of $197 million, but it made $143 million before interest and taxes. Chrysler's last full-year profit was in 2005, when it made $1.8 billion.

Obama said he understands why many in the country were skeptical — or outright opposed — to a massive infusion of cash into the beleaguered industry, and acknowledged that "the politics of it weren't good."

"Listen this was a hard decision," he said. "I didn't want government to get into the auto industry — I've got enough to do."

In a report on the status of the auto industry, the White House said failing to intervene would have led to the loss of nearly 1.1 million jobs. The auto industry has added 55,000 jobs in the year since the automotive bankruptcies, making it the strongest year of job growth in the industry since 1999.

Obama pointed to several signs of progress: Plans by GM and Chrysler to skip the typical summer shutdown of several auto plants to meet demand for hot-selling vehicles and the addition of shifts at GM, Chrysler and Ford Motor Co. plants.

White House officials estimate that Detroit automakers could add 11,000 new jobs before the end of 2010.

The administration also says the government is on track to recover all the taxpayer money it poured into GM, Chrysler, auto lenders and suppliers to avert a near-certain industrywide meltdown.

However, the White House said that proclamation referred only to the $60 billion spent by the Obama administration, not the additional $25 billion funneled to the industry in 2008 under the Bush administration. The most recent government estimate found that taxpayers will lose $24.3 billion on the auto bailout.

GM has repaid $6.7 billion that the government considered loans, with the remaining $43.3 billion converted into a 61 percent stake in the company. GM is expected to conduct an initial public offering of shares in the company later this year, a move that could help the government recoup some of its investment.

United Auto Workers President Bob King said in a statement Thursday that GM would file paperwork in mid-August to start the process of selling stock to the public.

Chrysler received about $15 billion in government help and was placed under control of Italian automaker Fiat as part of its bankruptcy. The company has repaid about half of the $4 billion loan portion of its aid and is considering a public stock offering sometime in 2011.

The Associated Press and Reuters contributed to this report.

Video: Obama plugs economic jump-start

  1. Transcript of: Obama plugs economic jump-start

    CURRY: Good evening. I'm Ann Curry in for Brian Williams , who's on assignment in New Orleans .

    ANN CURRY, anchor: And tonight the economy is front and center. As President Obama spent the day in Michigan talking about his decision to bail out the US auto industry and pointing to GM as an economic comeback story, we got a new measure of just how the economy is doing overall. The gross domestic product, which is the broadest measure of economic growth , weakened in the second quarter to 2.4 percent. And in more unsettling news today, growth figures from 2007 through 2009 revised downwards, which shows that the economic meltdown was even worse than previously thought. NBC White House correspondent Savannah Guthrie now joins us with the White House 's take on where all this puts us. Savannah , good evening.

    SAVANNAH GUTHRIE reporting: Good evening to you, Ann. Well, one senior White House official told me today you got to look at the big picture. Eighteen months ago the economy was falling off a cliff. Today it is growing, but even officials here acknowledge that this recovery is running into some headwinds. The president today in Michigan , taking a short spin in Chevy 's new hybrid electric vehicle.

    President BARACK OBAMA: ...pretty smooth.

    GUTHRIE: In the heart of car country, Mr. Obama hoped to highlight a turnaround story, an American auto industry resurrected from the dead.

    Pres. OBAMA: Today, for the first time since 2004 , all three US automakers are operating at a profit. First time in six years.

    GUTHRIE: The auto industry is poised to pay back more than two-thirds of its $85 billion government bailout, and the administration says its rescue saved one million jobs. But the latest government figures out today show the larger economy in a stall, growing just 2.4 percent last quarter, not near enough to make a dent in unemployment.

    Ms. DIANE SWONK (Mesirow Financial Chief Economist): Given the depth of the recession, the extraordinary losses we endured, we should be seeing growth two to three times that of what we're actually seeing in the US economy .

    GUTHRIE: Part of the problem, consumers, normally two-thirds of the economy, are slowing their spending again. And though business investments have jumped 17 percent, many companies, even those now enjoying profits, aren't spending on new full-time workers, instead hiring temps or wringing more hours out of the employees they have.

    Mr. LAKSHMAN ACHUTHAN (Economic Cycle Research Institute): Fewer people are making a lot more stuff, and the companies are keeping that cash because they remain scared.

    GUTHRIE: In Detroit today, a city with 30 percent unemployment, the president said things are headed in the right direction.

    Pres. OBAMA: We are back on our feet! We are on the move!

    GUTHRIE: While many economists will tell you unemployment is likely to hit double digits again before coming down, officials here do think that that European debt crisis which had so shook the fragile economic recovery has largely passed and worked its way through the system. They don't think we're in for a double-dip recession, Ann.

    CURRY: All right, Savannah Guthrie this evening. Thank you so much , Savannah .


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