This week, I traveled to Michigan to speak at the 2011 Detroit Auto Show. While there, I spent time touring the show room floor with Senator Debbie Stabenow (D-MI), the Chair of the Senate Manufacturing Caucus, visited with executives from the “Detroit 3” - Ford, Chrysler and General Motors - and also got a glimpse at the company’s new product line ups.
Looking at the innovations premiered at this year’s show only confirmed my belief that in the next dozen years, the automobile industry will see more change than it has in the last 50 and that that change will encompass almost every aspect of what we think of today as the car business.
But at this time just two years ago, the fate of America’s auto industry was in question, as unlike any other time in the prior 80 years, our economy was facing a grave crisis. During the year when General Motors was celebrating its 100th anniversary, the American auto industry, long a symbol of this country’s productive prowess, was literally on the brink of collapse.
It was against this backdrop that our auto team members arrived in Washington in early 2009. We were faced with the task of figuring out whether GM and Chrysler, and by implication the US auto industry, was worth saving and if so, at what cost. While the world changed around them, these companies seemed to be stuck in the past. So, while the recession clearly dealt them a devastating blow, it landed on the back of companies that had allowed themselves to become badly overburdened over many years.
In the end, the President told our auto team to be fair, but to be commercial in our approach. We were told to act as if the taxpayer’s money was our own and to do no more and no less than what was required to get the job done. And that is exactly what we did. As the President has said many times, he didn’t run for office to be the CEO of a car company, and the auto team at Treasury adopted that same hands-off approach. The Administration made the decision to take the equity to which taxpayers are entitled, but with a firm conviction to manage that investment commercially and exit our position as soon as is practicable. We have, of course, kept a close eye on our investments—monitoring trends in the industry and keeping track of GM and Chrysler’s performance—but we have stuck to our decision to stay out of day-to-day decision-making.
In both cases, this strategy has paid remarkable dividends. These companies have been given a unique opportunity to start over, and they’re seizing it with both hands – as seen clearly this week in Detroit. GM and Chrysler still face challenges, but the companies' talented and energetic directors and management teams, in full partnership with the UAW, have already made enormous strides.
During the first part of 2009, General Motors and Chrysler went through a tough restructuring process that resulted in a tremendous amount of shared sacrifice from workers, investors and other stakeholders. Less than two years from when GM and Chrysler emerged from bankruptcy the industry has added nearly $75,000 jobs and for the first time in six years, the companies are all operating at a profit. And in November 2010, Treasury worked with General Motors as they executed an IPO- attracting $23.1 billion in private capital, making it the largest U.S. offering in history.
No one is declaring “mission accomplished,” but our determination to turn the companies around has yielded concrete returns remarkably quickly. Despite the greatest economic storm since the Great Depression, we avoided a devastating blow to communities across the country—nowhere more than in Southeastern Michigan—that rely on jobs and income from the U.S. auto industry.
But if we hadn't provided assistance to GM and Chrysler in their hour of need, we could be having a very different conversation right now about what could be for the city of Detroit, for the auto industry and for the future of American manufacturing. The taxpayers' investments at the height of the crisis that saved the auto industry from disaster and helped lay the foundation for what the future brings. If the show room floor offerings this week were any indication, that future is indeed very bright.
Ron Bloom is Senior Advisor to the Secretary for Auto Issues and Auto Task Force senior member. [Photo Credit: Gary Shrewsbury]