Driving a Volt at the GM Detroit-Hamtramck Assembly Plant in Michigan

With President Obama’s visits to Chrysler and GM factories today touting the success thus far of the 2009 auto industry bailout and managed bankruptcy program, it will be easy for critics and opponents to see this as nothing more than mid-term election campaigning and grandstanding. It is true that until the loans are paid in full, “the jury is still out” on complete success and whether or not any of this money was spent foolishly. However, these visits give us a chance to stand back and remind ourselves surely what would have happened if no loans were made.

A truth of the auto industry is that companies like GM, Ford or Toyota are really just assemblers of parts and components provided by a vast network of vendors. Yes, they design, engineer and market the vehicles, and conduct most of the larger metal stamping and engine assembly, but the vast majority of what goes into the car in your garage is outsourced. If GM and Chrysler were allowed to go into liquidation, which looked like a certain result back in 2009, the negative “domino effect” on these suppliers would have been similar to the high-velocity flow of the recent Gulf of Mexico oil spill. This is where the real damage would have been done on the economy, as untold jobs and companies would have been lost. Saving GM and Chrysler was not the only goal, but also limiting the damage on these two before they could fall and level suppliers that also serve Ford, Nissan, Mercedes and others in the U.S.-based manufacturing community.

GM’s anticipated IPO later this year and Chrysler’s IPO possibly later in 2011 will be big steps toward putting the loan money back in the government’s wallet and regaining the public’s confidence – with interest. Yes, there is a political element to today’s plant visits, which will have plenty of scripted photo and sound-bite opportunities. But this day also allows us to stand back and imagine what could have been…and it would not have been pretty.

James Bell, Executive Market Analyst
Kelley Blue Book’s kbb.com

This photo from the GM Archives shows President Ronald Reagan driving a Citation IV Concept car at GM Design in Warren, Mich., in 1984.