Even After Bailout, GM and Chrysler Invest Billions Abroad
9:00 AM, Nov 5, 2012 • By EDWARD NIEDERMEYER
The auto bailout debate, already a triumph of narrative over reality, took another turn for the absurd last week as both presidential campaigns exchanged salvos over what amounted to a misunderstanding about Chrysler's plan to build Jeeps in China. The dust-up began when the Romney campaign apparently misinterpreted a Bloomberg report that Chrysler was considering "localizing [production of] the entire Jeep portfolio" to mean that all Jeep production would be moved to China. Boston attacked President Obama for what seemed like a taxpayer-funded outsourcing of Ohio jobs. Chrysler responded by clarifying that it was only considering new production of all Jeep models in China, and Obama fired back by calling Romney "dishonest." The exchange highlighted the emotion that surrounds the broader auto bailout debate, but unfortunately the skirmish concealed a key issue that requires further examination: Whether the president's auto rescue will actually produce a sustained revival of American auto jobs, in addition to profits.
Like all corporate turnarounds, the auto bailout actually required deep job cuts here in the United States. Data from the Bureau of Labor Statistics (BLS) show the auto manufacturing sector lost over 211,000 jobs from 2008 to 2009, the majority of them from domestic automakers. From 2009 to 2011, average employment in the auto sector improved by only 52,800 jobs. Though the president's supporters would without doubt argue that even modest gains in auto sector employment are a benefit of the auto bailout, the fact is that foreign automakers have contributed significantly to that growth. But more importantly, and contrary to the president's jobs claims, expecting sustained U.S. job growth at GM and Chrysler simply isn't reasonable.
Auto sales in the U.S. have recovered somewhat since they shrunk by half in 2008, helped not a little by a boom in subprime auto lending and auto loan-backed security issuance. But, as a mature market, the United States will only enjoy a strong auto sales recovery for so long; when demand inevitably plateaus, only new exports to growing markets like China, Brazil, India, and Russia will fuel growth in American auto jobs. According to the president, rescuing GM and Chrysler would lead to just such a boom in exports of American-made cars. Unfortunately, the opposite has occurred. Rather than responding to the president's calls for "economic patriotism," the bailed-out automakers are accelerating investments abroad, adding jobs in growth markets (or nearby) rather than here in the U.S.
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