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.
Since the bailout, GM alone has invested $450 million in a new plant in Argentina, over $1 billion in a new plant in Wuhan, China, $500 million for two new plants in Brazil, $200 million for an engine plant in Thailand, $540 million for an engine plant in Mexico, another $420 million for new vehicle production in Mexico, and $150 million for a new plant in Indonesia. Additionally, GM has promised another $1 billion for new production in Russia, it has signed over millions in battery and other electric car technology to Chinese partners in exchange for a joint development center in China (PATAC), and has increased annual global sourcing of India-made parts from $500 million to $1 billion. In Europe, where GM has lost $16.4 billion since 1999, and now faces the same overcapacity issues that contributed to bankruptcy, it has closed only one plant (where it paid workers around $200,000 each in severance) and is now giving raises to German workers. This list is by no means comprehensive, but the message is clear: Having cut American jobs to the bone before and during the bailout, GM is now lavishing investment on everyone else, undercutting any expectation of increased American auto exports.
Chrysler may not be pulling Jeep production out of Ohio, as Mr. Romney apparently believed, but neither is it discussing exporting Jeeps from Ohio to the growth market of China. In fact, while Chinese-built Jeeps would likely be sold in China, Chrysler's parent firm Fiat is reportedly "keen" to produce Jeep and Chrysler models in Italy, for export to the U.S. So not only are America's bailed-out automakers not turning the U.S. into an auto exporting powerhouse as promised, they're actually working to increase the number of cars America imports, and working against the president's auto bailout promises.
But then they aren't alone; even the president seems to be working against his own vow to boost automotive employment by growing exports. In response to President Obama's tariffs on Chinese tires, China recently imposed new import tariffs on American-made SUVs, meaning a Jeep Grand Cherokee that costs around $28,000 in the U.S. costs closer to $85,000 in China. How many buyers does Chrysler expect to find at that price? The president's trade policy makes US exports to China less competitive than they would be otherwise, a fact that is without doubt driving Chrysler to invest in new Chinese Jeep production. Moreover, Volkswagen recently decided to locate production for new vehicles in Mexico as opposed to the U.S. because President Obama did not pursue a Free Trade Agreement with the European Union. Coincidentally, President Obama's Korean Free Trade Agreement has failed to deliver any noticeable improvement in sales of American-made cars.
Had the president promised to simply rehabilitate two Detroit-based multinational corporations, the auto bailout might reasonably be called a success based solely on the profits now being generated by GM and Chrysler. But the president's repeated claims that his auto policy was undertaken in order to grow an auto export base on behalf of American manufacturing workers simply ring hollow against the evidence. Tens of billions of tax dollars have halted the long-term decline in auto jobs, but GM and Chrysler are already building their futures far from America's manufacturing heartland. Mitt Romney may have misled when he claimed that Chrysler was abandoning Ohio with the president's blessing, but the president's entire justification for his policy has been just as deceptive.
Edward Niedermeyer, former editor of thetruthaboutcars.com, is a freelance consultant based in Portland, Ore.