FACT SHEET: How Bold Investments By the Administration in the Auto Industry and City of Detroit Put Americans Back to Work and Strengthened the Economy
During his State of the Union address, President Obama focused on America’s future and discussed the progress we’ve made on the economy since 2009. America is in the middle of the longest streak of private-sector job creation in history. Manufacturing has created nearly 900,000 new jobs in the past six years and the auto industry had its best year ever in 2015. And while there’s more work to be done to ensure a growing economy that works for all Americans, today, President Obama is visiting Detroit to experience firsthand the remarkable progress made by the American auto industry, the city and its people and neighborhoods.
When President Obama took office, the American auto industry was shedding jobs by the hundreds of thousands, with GM and Chrysler on the brink of failure and facing the possibility of liquidation—which estimates at the time suggested would have caused at least 1 million more jobs to be lost across the supply chain and around the country. Detroit was flat on its back, with unemployment headed to a peak of more than 25 percent. Many in Washington opposed providing government assistance and were ready to write off not just the American auto industry but the entire City of Detroit.
President Obama made the tough call in his first few months in office to place a bet on American workers and American manufacturing—and to place a bet on Detroit—by providing temporary Federal assistance to rescue the American auto industry. He also initiated a broader commitment to the City of Detroit that has been sustained and ongoing through a team of federal staff that partner with the Mayor, local business and community stakeholders to deliver tailored assistance, identifying unique programs and resources that have helped the people of Detroit get back on their feet. Because he acted quickly and aggressively, and demanded real change as a condition for government assistance, the American auto industry not only avoided a much deeper collapse but bounced back stronger than ever. Because he required the auto industry to modernize in exchange for that support, we are now producing the vehicles of the future that will enhance America’s competitiveness in the 21st Century and further reduce our dependence on oil.
The Administration’s efforts in Detroit include the continuous engagement of top Federal talent to support the Mayor, his team, and local partners—from City Hall officials to neighborhood advocates—tailoring Federal government support to address Detroit’s unique needs and opportunities. Alongside the progress of the auto industry, Detroit has made significant strides too. Unemployment in the city has been cut by more than half, and is now at its lowest levels since 2003. And because of the grit and determination of the people of Detroit and the President’s support, the city has begun a turnaround with brighter days ahead.
Today, President Obama is visiting Detroit to witness that progress up close. He will have lunch with Mayor Mike Duggan and special guests; deliver remarks at the United Auto Workers-General Motors (UAW-GM) Center for Human Resources on the Detroit Riverfront; and tour the Detroit Auto Show to see the 21st-Century cars, trucks, and auto technology that will help the American auto industry stay on top.
The Auto Rescue and the Auto Industry Resurgence
In late 2008, the American auto industry was on the brink of collapse. Access to credit for auto loans dried up and sales plunged 40 percent. In the year before President Obama took office, the industry shed over 400,000 jobs. Both GM and Chrysler were only weeks away from running out of cash and collapsing. Both companies faced the stark choice of seeking government support or facing almost certain uncontrolled liquidations, as no private source of credit was available anywhere near the scale needed. In this context, the Bush Administration extended short-term bridge loans to GM and Chrysler, but left it to President Obama to ultimately make the decision about how to resolve the industry’s historic crisis and what role, if any, the federal government should play. Following is a brief rundown of how the rescue played out:
- Additional Government Support Was Deeply Unpopular: Providing additional support to the auto industry was strongly opposed in Washington. The auto rescue was described by Republicans in Congress as “the road toward socialism”; “nothing more than another government grab of a private company”; “without any plausible plan for profitability”; and “the leading edge of the Obama administration’s war on capitalism.” Both a December 2008 poll and a March 2009 poll found that more than 60 percent of Americans were opposed to the government extending assistance to General Motors and Chrysler to help them stay in business.
- President Obama Required Fundamental Change in Exchange for Support: On March 30, 2009, after studying the plans submitted by GM and Chrysler, President Obama decided that he would not commit any additional taxpayer resources to these companies without requiring fundamental change and accountability in return for assistance. He rejected their initial viability plans and demanded that they develop more ambitious strategies to reduce costs and increase efficiencies.
- The Damage from Allowing GM and Chrysler to Fail Would have been Immense: President Obama also recognized that failing to stand behind these companies would have consequences that extended far beyond their factories and workers. GM and Chrysler were supported by a vast network of auto suppliers, which employed three times as many workers and depended on the auto companies business to survive. An uncontrolled liquidation of a major automaker would have had a cascading impact throughout the supply chain, causing failures and job loss on a larger scale. Because Ford and other auto companies depended on those same suppliers, the failure of the suppliers could have caused those companies to fail as well. Also at risk were the thousands of auto dealers across the country, as well as small businesses in communities around the country that rely on the ongoing income from auto workers. Some experts estimated that were GM and Chrysler allowed to liquidate, at least 1 million additional jobs could have been lost. In addition, the cost to the government to provide social safety net services and health care to these workers and communities would have been substantial.
- The President Placed His Bet on the American Auto Worker: To avoid this outcome, the President decided to give Chrysler, GM, and their stakeholders a chance to show that they could take the tough but necessary steps to become viable, profitable companies. Following the emergency loans to Chrysler and GM and a revamp of their businesses – with a total of $57 billion of additional taxpayer support committed by the Obama Administration – the companies returned to profitability, became more competitive, and served as engines for growth, leading a nationwide manufacturing recovery. By the end of 2014, the Administration exited the last investment under the auto rescue. Every dime of the funds provided by the Obama Administration had been repaid.
Here are just a few indicators of the progress in the American auto sector since 2009:
- Strongest Auto Job Growth on Record: Since Chrysler and GM emerged from bankruptcy in mid-2009, the auto industry has added more than 646,000 jobs across manufacturing and retail, the industry’s strongest growth on record. The more than 300,000 auto industry manufacturing jobs have led a manufacturing sector that has added nearly 900,000 jobs since job growth began nearly six years ago.
- American Auto Production has Doubled and Auto Sales are at an All-Time High: America is once again a world leader in auto production and technology. Auto sales in the U.S. reached a record level of 17.4 million units in 2015, the strongest in history. And domestic production has more than doubled from below 6 million units per year in the depths of the crisis to about 12 million in 2015.
- The Detroit Three are Hiring, Profitable, and Investing in the United States: GM, Chrysler, and Ford are adding jobs, generating profit, and investing in their U.S. facilities. Since GM and Chrysler exited bankruptcy, the Detroit Three have invested in facilities and added shifts at plants all across the country, totaling more than $30 billion in domestic investment. Each of the companies is now positioned to compete globally and conducting R&D on state-of-the-art fuel efficient, electric, and autonomous vehicles. The companies’ most recent agreements with the UAW commit to additional investments, additional raises, and additional jobs.
- International Automakers are Investing in the United States Too: International automakers—recognizing the quality of our workforce and the strength and dynamism of the American economy—have $52 billion invested in U.S.-based production facilities and directly employ more than 97,000 Americans.
- American Automotive Products Exports are up 89 Percent Since 2009: In 2014, the total value of U.S. automotive products exports was $160 billion, up 89 percent from 2009. And more than 60 percent of those exports in 2014 went to the Trans-Pacific Partnership (TPP) region, highlighting the opportunities presented to the American auto industry by the tariff cuts and elimination of non-tariff barriers included in TPP.
- American Auto Technology is Again the Envy of the World: Due to American innovation and commonsense fuel efficiency standards, the fuel economy of new vehicles sold in the U.S. is at an all-time high, the cost of batteries has fallen 70 percent, and the distance our electric cars can travel on one charge has increased significantly. American automakers are expanding consumer choice and leveraging this progress to design lower-priced low-carbon and electric vehicles that are poised to be strong competitors in the global market while incorporating new technologies that have the potential to save thousands of lives per year. And they are not slowing down; one automaker recently announced they sought more patents for breakthrough technologies last year than they have in the last 100 years.
- Ramping Up Investments and Writing the Rules of the Road for the Auto Technologies of the Future: Autonomous vehicles (or “self-driving cars”) have the potential to transform transportation, giving us the chance to lead the world in a technology that can save lives, reduce emissions, and give new mobility to millions of elderly and disabled Americans. The President and his Administration are taking bold new steps to make that a reality, including by proposing to invest $4 billion in autonomous and connected vehicle research, development, and deployment efforts. To help accelerate deployment, last week Secretary Foxx announced at the Detroit Auto Show that he would take new regulatory action to move beyond piloting and testing for self-driving vehicles. Among those efforts will be redefining regulations in order to enable technology innovation, establishing a paradigm for testing and performance standards to ensure vehicle safety, partnering with states on model state legislation to prevent a patchwork of approaches that would slow down innovation, and proposing updates to our national rules of the road to accommodate self-driving vehicles. In addition, earlier this year the Administration launched a $40 million Smart Cities Competition to challenge mayors across the country to develop strategies for deploying self-driving cars, autonomous vehicles, and smart sensors to prototype the future of transportation in their cities.
Federal Support for a Resurgent Detroit
Over the past seven years, this Administration has been steadily taking a different approach to engaging in communities—disrupting an outdated, top-down way of doing business, and transforming the Federal government into a more effective partner for local stakeholders. This approach has led to the launch of numerous initiatives and partnerships in places across the country, such as the Strong Cities Strong Communities initiative, memorialized by a 2012 Executive Order, to embed full-time Federal staff with city governments to provide capacity and technical assistance to cities in economic crisis
The Administration has had a Strong Cities, Strong Communities team on the ground in Detroit since 2011. Detroit was one of the original fourteen cities to receive full-time Federal staff embedded in the city government to provide capacity and technical assistance by working directly with city leaders, local business, philanthropy, neighborhood and community leaders to identify federal resources, cut through red tape, and ultimately co-develop solutions with city leadership, helping local partners achieve their economic goals. In 2013, when Detroit filed for bankruptcy, the President appointed a special federal coordinator and interagency team to provide additional sustained municipal capacity and customized technical assistance, and assist in identifying existing federal resources to support the city. Detroit’s challenges were decades in the making and will not be resolved overnight, but this collaboration has led to some notable and steady progress.
Today, the Detroit Federal team is working to provide a “one-government” approach, bringing federal resources and expertise across agencies together to support Detroit. At the direction of the President, this robust on-the-ground engagement with Detroit Mayor Mike Duggan has yielded impressive results. This partnership has led to many recent accomplishments, including:
- Significant Progress Toward Blight Elimination: The Treasury Department’s Hardest Hit Fund provided Michigan with more than $130 million that was directed to the City of Detroit for demolition. Detroit has taken down over 7,500 blighted structures in under two years while maintaining a careful balance between program speed, environmental impact, and cost. Independent studies found a payoff of more than 4:1 in increased property values as a result, and even greater increases where demolition was combined with other neighborhood improvements. Building auctions and rehabilitation are incorporated where possible and vacant lots are available for neighbors to purchase for $100.
- Going from Half the City in the Dark to High-Efficiency Lighting Everywhere in Less than Two Years: In 2014, nearly half of Detroit’s 88,000 streetlights were dark. The Department of Energy provided technical assistance on advanced lighting to the newly established Public Lighting Authority (PLA), and in less than two years, the city will go from being in majority darkness to being re-lit with a smaller carbon footprint. Early estimates show that the LED street lights will save nearly 46 million kilowatts of energy per year, resulting in nearly $3 million in annual cost savings for the City. Anticipated emissions reductions are equivalent to the annual emissions from 10,993 passenger vehicles.
- Supporting Workforce Training for Young People, the Long-term Unemployed, and the Formerly Incarcerated: Detroit received a $5 million demonstration grant from the Department of Labor to support additional workforce training for youth and the long-term unemployed. A portion of the funds is used to support an American Job Center (AJC) within a correctional facility and to launch a job preparation program for citizens returning to civilian life from incarceration. Detroit’s My Brother’s Keeper (MBK) Initiative works closely with these efforts to support returning citizens.
- Meeting Detroit’s Full Bus Schedule for the First Time in Decades: With the support from a $25 million Department of Transportation grant, Detroit purchased 80 new buses so that the city can now, for the first time in decades, meet its full bus schedule. There are now 192 buses on the road daily, the most in more than 20 years, and 24-hour service was recently announced for some key routes. Ridership is up by 25,000 to 50,000 trips per week since adding the buses last year, while customer service complaints are down 20 percent.
- Innovative TIGER Grants to Support a Regional Transit Authority and M-1 Rail: The Department of Transportation provided more than $25 million in TIGER grants to Detroit for the new M-1 Rail that connects the Downtown and Mid-Town corridors. The funding for the M-1 Rail inspired the creation of the Regional Transportation Authority (RTA), a long-sought goal of transportation planners.
- Supporting Expanded Affordable Housing: In 2014 and 2015, the Department of Housing and Urban Development (HUD) closed on financing for 14 multi-family development projects, including substantial renovation or new construction of over 1,400 units of affordable and market-rate housing (with 600 renovations completed to date). HUD also provided over $16 million in capital funds to the Detroit Housing Commission to assist in the operation and renovation of Detroit’s public housing units, which has been returned to local control after a decade in receivership.
- Investing in Green Infrastructure That Prevents Flooding: In the aftermath of a flooding disaster in August 2014, HUD provided $8.9 million for green infrastructure projects that will redirect water out of the over-loaded sewer system and into more sustainable gardens, bioswales, and tree plantings. The Environmental Protection Agency, in partnership with foundations and non-profits, has supported projects that allow vacant lots to be converted to rain gardens.
- Developing a Comprehensive Plan for Spurring Manufacturing: Detroit was one of the first 12 communities designated as an Investing in Manufacturing Community Partnership (IMCP)—a Federal initiative to support comprehensive economic development strategies designed by communities. Through the Advance Michigan initiative, over thirty partner organizations banded together to build the region’s capabilities to master the next frontier of automotive technology and manufacturing through new supplier networks, infrastructure, export and foreign direct investment opportunities, and more. The IMCP designation also prompted Advance Michigan and its partners to commit to $177 million in training and workforce development activities to upgrade the region’s talent infrastructure through new talent attraction and training in the latest manufacturing technologies for incumbent workers.
- Supporting Groundbreaking Auto Parts Research through Manufacturing Innovation Hubs and over $140 million in Public-Private Funding Going to Detroit: In 2014, Detroit won the competition for the Department of Defense's Lightweight Innovations for Tomorrow (LIFT) lab, bringing over $140 million in public-private investment in cutting-edge manufacturing research to Detroit's oldest neighborhood, Corktown. In 2015, the Department of Energy's Institute for Advanced Composites Manufacturing Innovation (IACMI) announced plans to co-locate some of its work with LIFT. This co-location joins two research facilities, reflecting how materials need to be joined and work together in cars of the future: lightweight metals working with advanced composites.
- Bolstering Economic Development: The Department of Commerce's Economic Development Administration has invested over $5 million in the Detroit area since 2010, including NextEnergy’s improvements to a battery testing facility, as well as funds to support an advanced energy storage system cluster and developing an advanced manufacturing cluster. The Department of Energy awarded funds to NextEnergy to support clean energy small businesses and entrepreneurs.
- Strengthening Global Engagement: Detroit sits on an international border with Canada that is the site for the New International Trade Crossing (NITC) approved in 2015. The Detroit-Windsor Border is the richest border in the world with more than $350 million in trade crossing every day, making global engagement an underused asset in Detroit's recovery. To that end, the State Department helped the Mayor launch the City’s first-ever Mayor’s Office of International Affairs in October, with Secretary Kerry. The team is assisting the Mayor in creating the city's first global engagement strategy, finding resources, leading trade missions, and developing a refugee resettlement strategy to support resettlement of refugees from Syria in support the of Administration's policy.
In 2016, the Federal-Detroit partnership will continue to address the Mayor's priorities in expanding access to mortgage finance, building the workforce training system, developing Detroit's resiliency, and supporting global trade that benefit Detroiters.