August 6th, 2009
05:06 PM ET
5 years ago

Judging Obama's driving record

NEW YORK (CNNMoney.com) – President Obama ended his first 100 days in office amid hopes that both General Motors and Chrysler Group might both still avoid bankruptcy. In his second 100 days, he created a new U.S. auto industry.

The reshaping of GM and Chrysler through bankruptcy is essentially complete, and the Treasury Department holds large stakes in both companies.

There is arguably no segment of the economy where the administration has had greater impact than in the auto sector. And there's also no accomplishment that surprised experts more.

"It was a remarkable feat, and it surprised a lot of people," said Dave Cole, chairman of the Center for Automotive Research, a Michigan think tank.

Some critics aren't convinced that a speedy bankruptcy was the right thing to do. Chrysler filed for bankruptcy April 30 and was out of bankruptcy on June 10. GM filed for bankruptcy on June 1. It emerged from Chapter 11 protection on July 10.


During the government-directed reorganizations, both companies shed tens of billions of debt and made deep cuts in their bloated dealership network, despite efforts by some members of Congress to protect the dealers.

But Jeffrey Manning, managing director at investment bank Trenwith Securities LLP, argues the companies would have been better off if the bankruptcy process took as much as nine months or a year. That way, the companies may have been forced to make even bigger changes to their operations.

Manning said the government's ability to convince bankruptcy judges in the two cases to accept that its plan was the only alternative, despite objections from some creditors, was a shock and could cause problems for the two automakers and other companies down the road.

Manning said lenders are going to be more wary about lending money to companies that are viewed as politically powerful, such as automakers, airlines and aerospace and defense manufacturers, for fear that they won't have the same
protections in bankruptcy that they once did.

"Borrowing is going to be more expensive," Manning predicted.

Regardless of whether the reorganizations fail or succeed, one thing is certain: the Obama administration will either get all the credit or all the blame.

By paying for the rescue with funds from the Troubled Asset Relief Program originally set up to fix the nation's banking system last fall, the White House was able to reshape the auto industry without any action by Congress.

The rescue came at a significant cost to taxpayers. The Treasury Department poured $19.4 billion into GM and $4 billion into Chrysler before their bankruptcy filings and is unlikely to get much, if any, of that money back.

Still, Treasury agreed to give another $30 billion to GM and $8 billion to Chrysler to fund their operations during and immediately after the bankruptcy process, loans that it hopes will be mostly be repaid through the sale of stock in both firms at some point in the future.

But at the very least, experts said that the fact that two of Detroit's Big Three are now beholden to the government for their survival allowed the White House to push for greater changes in the auto industry.

Automakers went along with tough new fuel economy standards the administration laid out in May. But Obama's push for a greener auto industry included a major carrot as well. The government-financed Cash for Clunkers
program helped jump start U.S. auto sales in July.

One thing both the critics and the supporters of the two reorganizations agree upon is that it is much too soon to declare either effort a success.

"The story is not over yet. We don't know how it ends," said Tom Libby, president of the Society of Automotive Analysts, who said the administration deserves a log of credit for the changes put in place and the pace at which it achieved the change.

"I think it's a major feather in the cap for the administration," he said. "It's something the management should have done over the last 20 years."

Manning is not as confident that enough was done to solve the industry's problems.

"Chrysler and GM took a lot of baggage with them out of bankruptcy, and they both have a lot of operational challenges," he said. "Until I can see evidence of strong consumer demand, I'm not optimistic."

Talkback: Do you think Obama's forcing of GM and Chrysler into bankruptcy will help save the U.S. auto industry? Share your comments below.


Filed under: President Obama
soundoff (28 Responses)
  1. Mississippi Mike

    Just because he gave huge stakes of the companies to the unions, confiscated large portions for the federal government and shafted shareholders and creditors doesn't mean that what he did was a good thing. What I think is comical is that Ford is doing the best right now and they just as easily could have joined in the restructuring fun time. What does that tell you?

    August 6, 2009 05:14 pm at 5:14 pm |
  2. Typical Republican

    Boy...Obama sure did ruin the country....you know...saving the auto industry and all. What a bad guy. I hear he's trying to make sure all citizens of the US have health coverage, he sure is a bad guy. He's actually in Afghanistan...the ORIGINAL place we went to war, actually fighting terrorism, rather then figments of his imagination (aka: WMDs). Boy, he sure knows how to go after the right place (where the terrorists REALLY are for example) for his war...what a bad guy.

    He would be so much better if 3000 people died in his first 8 months of office. And you know, if they were killed by terrorists from Sweden, it would be great if he went and attacked a country, lets say...Mexico.. in response. I miss Bush, and all the FANTASTIC things he Didn't and couldn't do.

    August 6, 2009 05:15 pm at 5:15 pm |
  3. Proud Member..Party of No

    Support for Republican congressional candidates has risen to its highest level in recent years, giving the GOP a five-point lead over Democrats in the latest Congressional Ballot.

    August 6, 2009 05:16 pm at 5:16 pm |
  4. Four and The Door

    Propping up these companies only to have taxpayers dragged down with them was a bad decision from the start. No jobs were saved and it costed America billions of dollars when we are living on borrowed money to start with.

    Is David Axelrod going to try to spin this into a win for the administration? Good luck with that.

    August 6, 2009 05:17 pm at 5:17 pm |
  5. Steve, Columbia SC

    Don't kid yourself, the government, WE THE PEOPLE, owns a major portion of the US auto industry................and we will never make any money on that investment.

    Ask you children 20 years from now.

    August 6, 2009 05:22 pm at 5:22 pm |
  6. joe

    I find it hard to offer congratulations on a 200 day anniversary where many of the promises have not been achieved and the US population is starting to break apart at the seams; there are now two camps PRO and AGAINST Obama. That is not the calling card of a unifying leader. North Korea has flexed it muscles and Bill had to do Hillary’s job. No one really understands what the healthcare plan is and Mr. Obama is trying to rush it through and no one can digest all the implications (or sheer volume of text) of the bill. Green Jobs are mysteriously absent, Oil is higher and while some metrics of the economy show signs of improvement the Philly Fed is talking about needing to raise interest rates to fend off inflation due to the massive run up in US debt. Many of us can walk around our cities and towns and notice more homeless, more vacant stores, more graffiti, more garbage and certainly an increase in crime. And we have spent Trillions to what effect? Is there really a reason to congratulate someone for just sitting on his laurels for 200 days?

    August 6, 2009 05:26 pm at 5:26 pm |
  7. Mel Bailey

    Now , it is also time to change to the Single-payer health care system. Many do no see that the insurance companies do not have our best interest at heart. Regardless what it is, be it hurricane damage, vehicular accident, health care or otherwise, the insurance companies have always tried to pay as little as they can get away with paying.

    It is true that you can fool some of the people all the time.

    August 6, 2009 05:26 pm at 5:26 pm |
  8. dominican mama 4 Obama

    Oh, yes! So many accomplishments to remember from our President, pardon me! The auto industry.... what a fantastic feat, indeed!

    Staggering the results you obtain when brilliance is at the helm. I'm sure Barack is a spiritual man, but thank God he's not hearing "voices" a la Bush telling him to make f'd up decisions without consulting someone with a brain first. And to think the ACTIVIST SUPREME COURT stuffed Bush down our throat for a second term. Jeesh!! Imagine how far Barack would've taken this nation if he'd only stepped into a normal presidency.

    August 6, 2009 05:28 pm at 5:28 pm |
  9. gt

    the ones who think the clunkers rebates are a good idea,,, call you dealers and ask them ... hundreds of clunkers ,,, no gov. cks .... another waste of our money ....rebates for everyone....ugh !!

    August 6, 2009 05:29 pm at 5:29 pm |
  10. Kevin B

    What would the GOP hate machine say if the Obama administration let the auto industry go under? They would besides themselves with fake indignation, about how dare Mr Obama let it happen?

    It is hard to take the GOP seriously if all they have is obstructionism, name calling and thinly veiled bigotry as a political strategy.

    August 6, 2009 05:29 pm at 5:29 pm |
  11. Zero.

    I said also said that yesterday...

    August 6, 2009 05:30 pm at 5:30 pm |
  12. Jesse

    GM and Chrysler are doing great. I just saw in the Cash for Clunkers program GM was a no show in the top 10 cars sold. Chrysler has one car in the top 10. I guess the American people really trust those brands now that they are Goverment/Union owned.

    August 6, 2009 05:31 pm at 5:31 pm |
  13. dominican mama 4 Obama

    Y'all remember the cries of SOCIALIST when he had to jump in and act on the auto industry????

    The MAN IS ON THE BALL!!!

    I am so proud of our president. NO ONE could've taken on these challenges and handled them any better. NO ONE!

    August 6, 2009 05:32 pm at 5:32 pm |
  14. Robin in SC

    Let's see...the housing and auto industries are the two largest items in our national economy. If these two items are selling, then millions of people are working, i.e., getting a paycheck so they can spend money on other things, resulting in the workers who work in those industries keeping their jobs, i.e. getting a paycheck so they can spend money, and so on and so on. If houses and cars are selling, people are borrowing money. If they're borrowing money, the financial industry is loaning it. Between the restructured mortgages, automaker money, and Cash for Clunkers, seems to me that the most fickle parts of our economy are being stimulated. Isn't this what was supposed to happen? Get out your Econ 101 books, folks!

    August 6, 2009 05:32 pm at 5:32 pm |
  15. Kevin - PA

    Those who think that propping these industries up wasn't the right thing to do are blind to the fact that so much of our economy is tied to the auto industry. Would you rather pay billions in supporting an American industry or pay billions in unemployment for jobs that won't be coming back, you decide.

    August 6, 2009 05:34 pm at 5:34 pm |
  16. chas

    The real question is, how can anyone be stupid enough to believe ANYTHING these hypocritical GOP types say?! Anyone remember they created this whole mess with their no regulation, greed is good policies in the first place? Now they are acting like good corporate stooges and trying to protect insurance profits and to hell with the american people!

    August 6, 2009 05:37 pm at 5:37 pm |
  17. Peoples Voice

    He still has my confidence. Considering how the corporate world and the GOP have been slandering him, it's no wonder his poll numbers are not lower.

    Keep on going, Mr. President.

    August 6, 2009 05:38 pm at 5:38 pm |
  18. makesUwonder

    Hey, now that the American people own GM and Chrysler I think we should have a company car. What do ya think President Obama? Let's share some more of that wealth!

    August 6, 2009 05:39 pm at 5:39 pm |
  19. Jeff in Atlanta

    Let's see, congress, (clinton), thinks people should have houses so he lowers eligibility and the banking industry tanks.

    Now let's trade clunkers for new cars. I wonder who owns those clunkers. Could it be people who can't afford a new car. Wonder where this is headed?

    If we don't learn from history we are doomed to repeat it.

    Guess we're doomed. (but of course we knew that on January 21, 2009 and the last 200 days just proved us right)

    August 6, 2009 05:39 pm at 5:39 pm |
  20. Trade Freedom for Security, Lose Both

    Ask yourself, are you better off than you were 200 days ago? For me, the answer is no:
    1. Unemployment in my household has gone from 0% to 50%
    2. Income has gone down 50%
    3. Actually cut my spending programs and eliminated pork because I cannot deficit spend like Government.
    4. Home value has dropped another 10%

    But it's not all bad. I am a more generous and giving person.
    - I pay for your mortgage
    - I pay for bailing out companies that should be allowed to fail
    - I pay for your clunker

    And in time for Christmas, I will get to pay for your health care. Obamatopia, ain't it great.

    August 6, 2009 05:41 pm at 5:41 pm |
  21. alvino

    To see the republican congressional approval rating go up from a percent in the high teens, is surely cause for the party of "No!" to celebrate. It appears their non stop lying and having no plans other than tax cuts for the wealthy is really paying off for them, and resonating with the American populace. I think not!

    August 6, 2009 05:41 pm at 5:41 pm |
  22. Legna

    A new company is developing now that will eliminate GM. All car companies, auto parts companies will b reshaped forever. All the money spent on GM will be for naught

    August 6, 2009 05:47 pm at 5:47 pm |
  23. malclave

    Obama is close to being an absolute failure.

    Of course, that fact doesn't fit in with the left-wing spin, so CNN will never honeslty report facts.

    Don't bother reporting me to the White House snitch line, I've already done so myself.

    August 6, 2009 06:00 pm at 6:00 pm |
  24. Joe, Georgia

    I'm pleased that Barack Obama is leading our country and I wish Republicans would stop talking down our country and our economy. Obama inherited a trillion dollar deficit and an economy in free fall not to mention two wars. The Republicans in Congress that created this mess have done nothing but attempt to undermine any step forward. We are very fortunate that the President is smart and strong to withstand the contstant attacks and undermining. It's really disappointing The Republicans in Congress don't care more about our Country and less about their political futures.

    August 6, 2009 08:22 pm at 8:22 pm |
  25. Angi's mom

    We voted for President Obama because he promised change...and need I remind anyone that we REALLY REALLY needed change? Thanks, President Obama, for withdrawing troops from Iraq, initiating health care/insurance improvements, saving the auto industry and banks, sending money for our local projects, and giving our energy needs priority. Most importantly, after 8 years of intimidation and lies, you're restoring this country's respect and dignity to the rest of the world. All this accomplishment in 200 days. I only hope to see the end of this Afghanistan War over soon. So I say, Mr. President, you and your family are awesome.

    August 6, 2009 08:24 pm at 8:24 pm |
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