Judging Obama's driving record

Nowhere has the Obama administration wielded more influence in its second hundred days than in the reorganization of GM and Chrysler.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Chris Isidore, CNNMoney.com senior writer

Obama's money moves
200 days in, the President is going for broke. Click for analysis of where he's succeeding - and where hes not.
What I got with Cash for Clunkers
Take a peek at the heaps (no offense) these 6 turned in -- or tried to turn in -- to get their Cash for Clunkers deal.
Obama: 200 days in office
When he became the 44th president on Jan. 20, Barack Obama inherited the worst economic crisis since the Great Depression. After 200 days, here's a look at the progress he's made toward a recovery.
When do you think the economy will improve?
  • Next year
  • Over the next few months
  • Not for at least a year
  • It's already on the mend
Top 10 Cash for Clunkers cars
These are the most popular cars purchased under the Cash for Clunkers program.

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.

Too soon to say if bankruptcies worked

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. To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
Here are the 20 most ticketed cars in America The racy Subaru WRX tops the list, but some of the other ticket magnets will surprise you. More
Lamborghini to unveil 910 horsepower plug-in hybrid The Lamborghini Asterion concept car will have a V10 engine and three electric motors. More
The weapons of The Walking Dead Zombies are fiction, but the weapons on The Walking Dead are real. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.