"(After the auto bailout) General Motors is back on top as the world’s No. 1 automaker."
Barack Obama on Tuesday, January 24th, 2012 in the State of the Union address
President Barack Obama says that after bailout, GM is now the world's top automaker
President Barack Obama used his 2012 State of the Union address to tout the success of the federal auto bailout — not that he called it that.
"We got the industry to retool and restructure," he said. "Today, General Motors is back on top as the world’s No. 1 automaker."
We wondered: Is an American car manufacturer again ruling the roost?
Here's how the president set up his claim:
"On the day I took office, our auto industry was on the verge of collapse. Some even said we should let it die. With a million jobs at stake, I refused to let that happen. In exchange for help, we demanded responsibility. We got workers and automakers to settle their differences. We got the industry to retool and restructure. Today, General Motors is back on top as the world’s No. 1 automaker. Chrysler has grown faster in the U.S. than any major car company. Ford is investing billions in U.S. plants and factories. And together, the entire industry added nearly 160,000 jobs. We bet on American workers. We bet on American ingenuity. And tonight, the American auto industry is back."
The U.S. government did sink billions of dollars into the auto industry through the Troubled Asset Relief Program to keep GM and Chrysler from going under. (Though not Ford, which refused that federal money.) In return, it got an ownership stake in GM, now down to about one-third of the company's common stock. And while the automakers haven't exactly repaid the government in full, as executives claimed this summer, overall, a senior editor at Fortune has calculated that TARP has made taxpayers money.
Meanwhile, U.S. automakers' sales, including Ford's, are rising.
Who's No. 1
Obama's speech used a statistic reported just days earlier: GM and its partners, by selling 9 million vehicles in 2011, once again became the world's top-selling automaker. (GM automobiles include Chevrolet, Cadillac, Buick and GMC.)
The company edged out Toyota, which grabbed the top spot in 2008 as the U.S. economy struggled.
Analysts said the turnaround stems from the popularity of its latest vehicles, such as the Chevy Cruze, according to the Washington Post and others. Sales worldwide rose 7.6 percent, an increase of 640,000 more cars and trucks in 2011 from the year before, according to ABC News and the Los Angeles Times. Nearly 4.8 million of the 9 million were sold by Chevrolet.
"It is an accomplishment that GM has been able to reverse the tide in the U.S. and Asia, and they are doing very well in emerging markets considering just a few years ago the company was in real challenging straights," said John F. Hoffecker, an auto industry consultant with AlixPartners, told the Los Angeles Times.
But there are a few caveats to Obama's claim that the bailout put GM back on top.
"Luck is incredibly important — as we've seen for GM these last 12 months," said Jeremy Anwyl, vice chairman of auto information site Edmunds.com. "They were really able to benefit from conditions in the marketplace."
• GM's sales number is based on sales by both GM and its joint ventures in China, which aren't wholly owned subsidiaries. That's led Volkswagen, which says it sold 8.2 million vehicles last year, to challenge GM's claim to the top spot. "Rankings are mostly about bragging rights, but there has been a long-running and robust debate over how to account for vehicles sold through affiliates," Reuters reported. "... Some analysts extract those sales from GM's results."
• Toyota, which hasn't yet reported results for the full year, had to grapple with an earthquake and tsunami in Japan and floods in Thailand. So GM's main competition saw its production and sales decrease. It predicts its sales are down about 6 percent, Reuters reported. Meanwhile, merely the news that Toyota might experience shortages drove up summer demand for American vehicles, Anwyl said.
• GM, in addition to getting TARP funds, also went through bankruptcy in 2009. "Companies typically rebound as they exit bankruptcy," Anwyl said. (Of course, it's important to note that the bankruptcy reorganization was made possible by taxpayer funds.)
• Ford, which didn't accept TARP funds, has seen its sales increase 11 percent — without Obama's help to "retool and restructure." (It didn't need the bailout in large part because of good timing — it had raised significant money while money was still easy to get, before the credit crunch created by the economic crisis, Anwyl said.)
"I think if we're really being fair about the bailouts ... you almost have to wait another two or three years to see how this plays out," Anwyl said.
And it won't be easy next year for GM to hold onto its top spot. Its midsize Cruze, for example, will face competition from recent models from Honda, Hyundai, Kia, Toyota and Volkswagen.
"That's a staggering amount of competition," Anwyl said.
Obama's right that GM's sales, along with sales by its affiliates, were No. 1 in the world in 2011. But getting full credit for those affiliates isn't without controversy. Meanwhile, crediting the bailout with GM's No. 1 spot is a stretch in a year when GM also benefited from challenges faced by its key competition. It's also telling that Ford, which wasn't part of the bailout, also has thriving sales. Obama's claim is partially accurate, but leaves out some important details. We rate it Half True.
UPDATE: Thanks to a sharp reader, we've updated this item to reflect that while Ford didn't take any of the $85 billion in TARP money for automakers that went mostly to GM and Chrysler, it did get other federal support, such as $5.9 billion in federal loans in 2009 to retool its vehicles, and a $250 million loan guarantee from the Export-Import Bank of the United States to finance export sales in 2010.