DETROIT, MICHIGAN—On the sprawling floor of Detroit’s Cobo Center, site of the 2016 North American International Auto Show, the latest and greatest vehicles, and the technology going into them, are at center stage for the international press.
Amid the glitz and glamour and shiny metal and chrome of this annual ritual for the automotive world, it’s easy to forget how close the U.S. auto industry came to complete collapse.
“When I was here in 2008, 2009, there was just a sense of depression, frankly, and fear,” describes U.S. Senator Debbie Stabenow, a Michigan Democrat. “Because we weren’t sure what was going to happen.”
Stabenow’s colleague in the U.S. Senate, Gary Peters, also a Democrat from Michigan, remembers just how dire the situation was. “When we would walk around this auto show in 2008 and 2009 we weren’t sure if some of these automakers would survive, whether or not General Motors and Chrysler would be around.”
In the frigid Detroit winter of January 2009, the scene outside the Cobo Center reflected those concerns. At the time, General Motors and Chrysler, two of the big three U.S. automakers, were on the verge of bankruptcy, iced by an economic downturn that forced many Americans to skip new vehicle purchases. Just over 13 million new vehicles left dealer lots in the U.S. in 2008. By 2009 that number dipped to just above 10 million.
Comeback from life support
Assembly lines halted, and thousands of workers like Frank Warren were laid off. “The event that led to my latest round of layoffs was a bunch of bad decisions being made by a bunch of executives being overpaid themselves,” he explained. “We had no idea we were on the verge of bankruptcy.”
The solution to the meltdown was for the U.S. government to finance loans to the struggling U.S. automakers.
“All we’re asking for is some help here, and they call it a bailout,” said Daimler Chrysler employee Keith Kennedy at the time. “They’re not bailing anybody out. It’s a loan.”
“In the 2008 meltdown, the auto industry was on life support,” says University of Michigan Law Professor John Pottow, who describes the U.S. government’s role in the crisis. “They basically came in as if they were a giant hedge fund, and said, we’re going to let you borrow some money on our bankruptcy terms, and that will be enough to fund your restructuring.”
The plan had its detractors.
“No amount of government stimulation is ever going get us back on our feet,” said Tea Party supporter Jeff McQueen during an organized protest against the loans outside Cobo Center during the 2010 North American International Auto Show.
Senator Gary Peters says the loans were indeed a risky move for President Barack Obama, who succeeded President George W. Bush as the meltdown in the auto industry accelerated. “Had that disappeared, and with the loans, it would have been catastrophic for him. He may not have been able to survive a re-election.”
Peters served as member of the U.S. House of Representatives at the time of the crisis, and was part of the Michigan delegation urging the president to act to save those auto companies in trouble.
“We all fought very aggressively to make sure that the funding was available for our companies to get through a very tough time and President Obama made some tough decisions,” Peters told VOA during an interview at the 2016 North American International Auto Show. “He was attacked by a lot of folks around the country who thought he should not help the auto industry.”
Pottow says the auto industry today may have looked very different if the Obama administration listened to those recommendations. “We might have shut one or two of them down had things gone the other way.”
But the government’s involvement was immediately clear to General Motors employee Matt Slade, who credits the loans with saving his job. “They kept thousands of people, especially in Michigan and the metro Detroit area, working,” he told VOA in an interview in 2010. “It’s not the perfect scenario; however, it did save our industry.”
Fast forward to 2015
“We’re coming off of the best sales year ever for American vehicles, ever, for 2015,” explains Senator Debbie Stabenow. “We’re totally back.”
Back, but not the same.
While many assembly lines in the region are busy churning out new, more fuel-efficient vehicles, the restructuring led to the elimination of several brands altogether, such as GM’s Pontiac and Hummer.
Although employment figures for the Big 3 U.S. automakers in Detroit are close to their pre-recession numbers, U.S. Senator Gary Peters says they are still down from recent highs.
“Even though they are making more cars, you don’t see the kind of increases in employment you would have seen in years past,” says Peters.
“A lot of people are back working in the industry,” says Stabenow. “A lot of people are back working in the parts supplier industry. We actually have more jobs in the parts suppliers than we do the manufacturers themselves.”
Those brands that remain are now the showpieces of more advanced, marketable automotive technology, and that’s what’s fueling the resurgence of jobs in Michigan, says Kevin Kerrigan, Senior Vice President with the Michigan Economic Development Corporation.
“Seventy-six percent of the research and development money that is spent in the U.S. is spent here in Michigan,” he says.
“I think innovation, I think technology, I think the bigger picture [is] what consumers are going to want down the road, are the true driving factor in what saved the auto industry,” says U.S. automotive expert Michael Caudill from the floor of this year’s Auto Show. “I think the auto industry saved itself.”
When President Obama visits the 2016 North American International Auto Show on January 20, he will get an up-close look at the newest technology and innovations in an industry his administration is partially responsible for saving, says University of Michigan professor John Pottow.
“President Bush started it, President Obama took it and ran with it,” he explains. “I do think they get credit because I do think there was a very significant possibility, certainly some people were advising, that you should just let the car companies fail, let them go their own way. And by backing them with that restructure, with that necessary capital, was the money that they needed to keep surviving; you do see healthy, smaller to be sure, but still healthy car companies.”