A big sales job for GM, White House
A dozen Obama administration Cabinet secretaries and top officials are fanning out across the Midwest in an unusual marshaling of government firepower to tell people in communities hit hard by the bankruptcy of General Motors Corp. that Washington will help with short-term relief and long-term plans to reshape the U.S. auto industry.
Meanwhile, GM began the biggest sales job in its history, gearing up a well-rehearsed campaign to persuade a wary public that it is witnessing the “rebirth of the American car.”
The company will launch new nationwide TV ads today touting bankruptcy as the path to a “leaner, greener, faster, smarter” company -- without mentioning the pain of the downsizing as it cuts as many as 20,000 more jobs, closes 14 additional plants and prepares to sever ties with about 42% of its dealers.
With GM following Chrysler into bankruptcy, President Obama faces a potential backlash among union workers and voters in key battleground states for the added economic pain the filings will inflict. Many people are angry, and the White House needs to respond.
The message from administration officials scattered from Ypsilanti, Mich., to Fort Wayne, Ind., this week has a harder edge than GM’s gauzy images of rebirth: The car is no longer king of American manufacturing. The future will depend on new, environmentally friendly jobs -- some in the smaller U.S. auto industry producing more fuel-efficient vehicles; others in nascent “green” industries.
“We want to transform the economy from dollars flying out of a tailpipe . . . to something that’s good for the planet and the economy,” Energy Secretary Steven Chu said. He later added, “I think American autoworkers know this is an issue we should have dealt with decades ago.”
Chu traveled Tuesday to Fort Wayne, where he said the administration wanted to convey that “we know you’re in pain. We know you’re in tough times.”
But he also toured WaterFurnace International Inc., a maker of geothermal heating and cooling systems for homes and commercial facilities, watching workers in blue shop shirts bolt metal frames encasing insulated copper piping and push them down a conveyor belt. It’s the kind of green-energy business the administration envisions as the future economic backbone of the country’s heartland, Chu said.
That message is a tough sell in places like Fort Wayne.
“It’s really sad that they’re washing their hands of the original industry in the country, much as they washed their hands of the steel industry and the textile industries,” said Orval Plumlee, president of United Auto Workers Local 2209 in Fort Wayne, where more than 100 GM workers were still applying for state unemployment benefits Tuesday. Employees at the local GM truck plant were furloughed May 1 when the plant was shut down for 10 weeks.
“I expected so much more from this administration,” he said. “I thought we’d have a friend in Washington.”
Ed Montgomery, a former deputy labor secretary named in March as director of auto recovery and workers, has been traveling to communities that depend on auto industry jobs. He has helped to funnel economic stimulus money to those areas and to speed delivery of unemployment payments, retraining grants and benefits from federal programs.
Obama said he understood the difficult process ahead for GM workers and others who indirectly depended on the company for their livelihood.
“Building a leaner GM will come at a cost. It will take a painful toll on many Americans who have relied on General Motors throughout the generations,” the president said Monday in announcing GM’s bankruptcy.
But the goal of the restructuring plan that GM drew up with Obama’s auto task force is to create a new kind of U.S. automaker. The smaller GM, with significantly less debt and union concessions, will be able to make a higher percentage of its cars in the U.S., including small, fuel-efficient vehicles, administration officials said.
“The fundamental restructuring that this company was finally able to accomplish . . . put it in a position to be able to make cars far more economically in the U.S. and reduce the need to bring cars in from overseas,” said Steve Rattner, head of the auto task force.
The key now is to convince the American people that the new GM is different from the old GM, Rattner said.
GM charged forward with its government-forced downsizing Tuesday, striking a deal to sell its Hummer unit to a Chinese firm. Hummer is one of eight vehicle brands the automaker is either selling or eliminating.
GM also sent letters to most of its 6,000 dealers telling them they would have to operate under strict new rules or face termination of their franchises in Bankruptcy Court.
Selling or closing brands and paring 42% of its dealers is bound to have an effect on sales, company executives acknowledge. To avoid sliding further, it’s especially important now for GM to reach out to consumers and assure them that buying a GM car isn’t a risk, advertising experts say.
GM holds just under 20% of the U.S. auto market by volume. It expects to lose a few percentage points in the short term, particularly as competitors including Ford Motor Co. leap to capitalize on GM’s woes and gobble up its customers.
GM and other automakers saw some hope in May auto sales figures released Tuesday. Although sales were down sharply again year over year, GM and Ford sold more vehicles in May than they did in April.
The White House has tried to help with sales as well. Obama reiterated Monday that the government guaranteed the warranties of vehicles from GM as well as Chrysler.
But the administration can’t provide warranties for the jobs lost in the restructuring. Obama has said simply that more jobs would have been lost if GM, and Chrysler before it, had been allowed to fail completely. Instead, the president provided additional government aid on the condition that the companies undergo drastic changes in bankruptcy.
In GM’s case, the U.S. government will become the majority shareholder after putting up $30 billion more in bailout money. But that means Obama takes ownership of GM politically as well.
White House Press Secretary Robert Gibbs said Tuesday that Obama asked the eight Cabinet secretaries and other officials “to go out into those communities, to listen . . . to make sure that people know what’s available in terms of retraining, in terms of help on their behalf, in making sure that they have the benefits that they deserve.”
Presidents often dispatch their Cabinet secretaries to campaign for reelection in the weeks before voters go to the polls. But sending them out en masse at other times is unusual.
Obama is not traveling to the Midwest himself as he heads to the Middle East. That’s a smart move, said Stephen Hess, a former White House aide and expert on the presidency at the Brookings Institution.
“The beauty in using your Cabinet is you can deflect the bad news,” Hess said. “This strikes me as particularly shrewd, not only because of the widespread problems with the auto industry. . . . It happens to be a section of the country that could be very much in play when you talk about holding the presidency.”
Times staff writer Ken Bensinger contributed to this report.