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Credit for auto industry recovery debated

This news story was published on February 28, 2012.
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By John Gallagher, Detroit Free Press –

DETROIT — If you want a lens through which to view Tuesday’s primary election in the state, it could be this one: How real is Michigan’s economic turnaround and who gets credit for it?

The answer to the first question is that the turnaround is “definitely real” as the unemployment rate has fallen, auto sales have improved and home sales have increased in recent months, pointed out Charles Ballard, a professor of economics at Michigan State University.

“Three years ago, it was in free-fall and nobody knew where the bottom was,” he said Friday. “I’d love it to be even better, but we really have had a halfway decent recovery after a very tough decade.”

Who gets credit — or even whether it’s deserved — has become a question of political debate.

It has focused mainly on whether the administration of President Barack Obama handled the near-collapse of the domestic auto industry the best way with a federal bailout, or whether, as GOP president hopefuls Mitt Romney and Rick Santorum have contended, it would have been better handled as a strictly private-sector process.

On Friday, as Romney spoke to the Detroit Economic Club inside Ford Field, Stacie Steward, a Chrysler worker, told a UAW rally outside that she might still be unemployed without the federal bailout.

“Chrysler had declared bankruptcy, and my plant was closing,” Steward, a member of UAW Local 1700, told the rally.

In 2009, Steward was laid off and wondered whether she would be able to send her daughter to college. Chrysler’s Sterling Heights Assembly Plant was originally selected for closure under the automaker’s bankruptcy restructuring plan. Today, the plant produces the Chrysler 200 and the Dodge Avenger, and Steward has not only sent her daughter to college, but also just bought a new home.

“I will never forget the day that Obama said he has faith in the automotive industry,” Steward said. “The day he gave us the bailout was the day that my dreams started coming back.”

At the same rally, UAW President Bob King said General Motors and Chrysler would have been liquidated but for the federal rescue because no private lenders were willing or able to assist at the time.

“We all would have been out of a job if it were not for who?” King asked about 200 union members at the rally.

“Obama,” the crowd yelled back.

Meanwhile, inside the stadium Friday, Romney took shots at the UAW and federal regulators, saying they caused the auto industry’s problems in the first place.

To be sure, there are still plenty of rough spots in Michigan’s recovery. Unemployment in Michigan, while down, remains high. Home prices have been rising in the state in recent months, but they’re still 31 percent below the 2005 peak of a $151,309 average sales price, according to the Michigan Association of Realtors. And home sales are 17 percent below their 2005 level in Michigan.

Then, too, gasoline prices have been rising sharply in recent days, and the prospect of $4-a-gallon gas or higher is fueling the debate over the direction of U.S. economic policy.

But most indicators show Michigan has rebounded sharply from the depths of its “lost decade,” when it shed jobs for 10 years in a row and led the nation in unemployment for years. The latest figures show that the state’s jobless rate has dropped from above 14 percent in 2009 to 9.3 percent in December — one of the sharpest improvements in the nation.

Meanwhile, automobile sales may hit 14 million vehicles this year, up from a recessionary level of 10.4 million vehicles a year. And, after shedding about 860,000 jobs over 10 years, the state has added back a net gain of about 100,000 over the past two years.

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