May 31 (Bloomberg) -- This past weekend, my hometown marked the 100th anniversary of its great civic festival, the Indianapolis 500. There are many ways to explain the race’s enduring appeal -- the pageantry, the drivers, the traditions -- but what makes it truly compelling is the cars: their roaring engines, the constant innovation, the new technologies that set records for speed.
Six hundred miles from the Indianapolis Motor Speedway, at the White House, cars also were very much front and center over the weekend. With the president in Europe, the administration was paying homage to cars here at home, rolling out (pardon the pun) Vice President Joseph Biden to visit an auto dealership in New Hampshire and to deliver a car-themed radio address, and dispatching other officials to Detroit to celebrate Chrysler Group LLC’s early repayment of $6 billion in federal loan guarantees. President Barack Obama will do his part June 3, when he visits a Chrysler plant in Toledo, Ohio.
Of all the policy challenges I saw Obama tackle in my two years in the White House, none was more complex than turning around the U.S. auto industry. When the president took office, the industry was in free fall. Sales of cars and trucks, which had topped 17 million in 2006, fell to 10.6 million in 2009. Two of America’s three major automakers were insolvent, kept alive by weekly inflows of federal cash. U.S. automakers had an unsustainable cost structure, were badly trailing their foreign competitors in the production of fuel-efficient and electric vehicles, and seemed unable to make the hard choices needed to arrest their downward spiral.
The course the president chose was unexpected and risky. Most Americans remember that the administration decided to "bail out" the car companies -- and indeed, the president did extend more loans and support to the industry. But he attached to the aid a series of controversial and painful conditions that ended business as usual in Detroit.
First, he did what the board of General Motors Co. lacked the resolve or independence to do: fire Chief Executive Officer Rick Wagoner. This angered Detroit’s civic leaders and Obama’s biggest ally in Michigan, Governor Jennifer Granholm. Then, in a move that stunned administration allies, the president forced GM and Chrysler into bankruptcy, putting them through a painful restructuring that forced many key constituents to accept deep cuts -- with layoffs, reduced payments to creditors and massive reductions in supplier support -- as a precondition of government funding for the industry’s future.
Auto Dealers Cut
The administration even imposed deep cuts on one of America’s most popular local business networks -- the beloved auto dealers who sponsor Little League teams, parks, giant flags and Fourth of July celebrations. This sparked outrage from dealers, senators and representatives, and even a stinging report from the Treasury Department’s special inspector general -- but the president stuck to his guns and demanded that the dealer networks be downsized.
To describe the results of this multifaceted policy as a success is like saying the cars at Indianapolis are fast. The turnaround has been breathtaking. Skeptics scoffed at the plan’s goal of returning GM to profitability by 2014; as it turned out, the company was profitable by mid-2010. GM’s sales are up by almost a third, and the new Chevy Volt leads the way in innovation among electric cars.
Even the sickest of the Big Three, Chrysler, whose problems in the spring of 2009 seemed so intractable that the White House gave serious consideration to letting the company go under, posted a $116 million profit for the first quarter of this year and paid back its federal loans six years early. Perhaps most importantly, the auto industry announced in May that it has begun to hire again, a feat that would have been deemed impossible two years ago.
But if the administration has succeeded in doing Detroit’s job better than Detroit itself ever could -- fixing the industry, restructuring costs, mapping a plan for the future, returning to profitability -- it still hasn’t convinced the American people of this success, or of its importance. Opposed by more than 70 percent of Americans at the time, the administration’s 2009 rescue of the auto industry was unpopular at the start, and remains so today.
Turning around public opinion on the government’s role in saving the auto industry is almost as important as the turnaround itself. The industry is clustered in three states -- Michigan, Ohio and Indiana -- which are at the core of the president’s electoral base; two, Michigan and Ohio, are must-wins for the Obama-Biden re-election effort in 2012.
In all of these states, the president will have to overcome a strong electoral headwind of high unemployment and cultural conservatism; in Ohio and Michigan, Obama also will have to contend with the Republicans’ 2010 takeover of the offices that run statewide elections. The president is counting on his successful auto rescue to be the tent pole that holds up his political prospects in these critical states.
But the White House can’t stop there; it also needs to sell this policy to Americans across the country. To refine its message, the administration should do three things:
First, tell the story with fewer numbers and more emotion; less prose and more poetry. Rescuing the auto industry isn’t just a matter of saving jobs and factories -- it means preserving a uniquely American manufacturing tradition. Cars are more American than apple pie or hot dogs (which, unlike the automobile, were both invented in Europe). We couldn’t have won World War II without this "arsenal of democracy"; as Walter Reuther famously said, "England’s battles were won on the playing fields of Eton, but America’s were won on the assembly lines of Detroit." The president needs to jujitsu Republican critics who accuse him of failing to understand American exceptionalism by pointing out his success in saving this exceptionally American industry.
Second, equally emphasize the pain that was imposed as a condition of support, and the hard and unpopular choices the president made. It was a plan of “shared sacrifice,” in which executives were fired, workers lost jobs, benefits and pay were cut, and dealers were shut down. The story of the tough choices the president made along the way must be told to convince the public that this wasn’t a handout.
Third, let the people of the auto communities tell their own stories -- encouraging homegrown viral videos and other uses of social and new media. This is a lesson I learned the hard way during the 18 months I was part of the White House team that struggled to explain the benefits of the Recovery Act. We used visits by the president and vice president, videos posted on WhiteHouse.gov, as well as endless statistics and charts and maps and graphics on Recovery.gov -- and yet nothing got the job done. Finally, two ice-cream shop owners made an iPhone video that told the story better than we ever had, by showing how a single small business loan rippled across their area to create jobs in countless other businesses.
The White House needs a similar personal narrative to tell the auto rescue story, or it will risk being denied a return to Victory Lane in 2012.
(Ron Klain is a Bloomberg View columnist. The opinions expressed are his own.)
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