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Obama selling auto bailout good news in Michigan

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.LARRY DOWNING / Reuters
/ Source: msnbc.com news services

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.