From the Obama thread:
After the Crash, Auto Towns Get Back to Work
By JEFF BENNETT And MIKE RAMSEY
FLORA, Ill.—A year after the U.S. government swooped in to rescue two crippled auto giants, the car business is showing signs of life again—and so are local economies across the heartland that depend on it.
As soon as General Motors Co. and Chrysler Group LLC finished racing into and out of bankruptcy court last fall, orders for headlamps and other car parts began streaming back to two factories here in this southern Illinois hamlet. The factories quickly re-hired about 400 of their 550 laid-off workers, giving Flora, Pop. 4,772, a big shot in the arm.
Local businesses are perking up. The Best Western just outside town occasionally fills all 41 of its rooms again. And shoppers are less scarce in Joe Etchison's appliance store. "Last year, people were sticking with the basics and skipping the stainless-steel refrigerators," he said, walking his downtown showroom trailed by Taz, his dog. People have "figured out the world has not ended."
Similar scenes are playing out across the Midwest, where the speedy stabilization of GM and Chrysler appears to have helped towns tied to the auto industry to get back on their feet more quickly than they may have otherwise.
One year ago today, the Obama administration took a gamble and forced Chrysler into a Chapter 11 reorganization. Two months later, it did the same to GM, spending almost $65 billion of taxpayer money in an effort to prevent the two giants from collapsing and perhaps gravely injuring the economy as a whole.
With Washington pushing the process, both companies exited bankruptcy in just six weeks—lightning speed compared to the years that some firms spend there. Auto-parts supplier Visteon Corp., for example, filed for bankruptcy protection four days before GM and still hasn't emerged from Chapter 11.
Car Makers Shift Gears
The taxpayer bailout remains controversial. The administration says it is unlikely to recoup all its money. GM and Chrysler are far from healthy. Many of the 400,000 auto jobs lost since 2008 are gone for good.
And the bailout's precise economic impact is hard to pin down. Improvements in the U.S. economy, stabilizing home prices and this year's uptick in new-car sales are undoubtedly helping the industry, too.
The industry is by no means booming. In March, motor-vehicle and parts plants were operating at 54.4% of their capacity, according to estimates by the Federal Reserve Bank. That's a low level, historically—70% to 80% is considered normal—but better than the low of 36.8% last June. In March, motor-vehicle and parts manufacturing was up 24.3% compared to the year-earlier period, according to the Fed. Overall manufacturing was up just 4.6%.
"The goal [of the bailout] was to prevent the imminent collapse of two major manufacturers at a time when there wasn't an answer to when things were going to stop getting worse," said Thomas Klier, an economist with the Federal Reserve Bank of Chicago. "From that perspective, it was effective." Now it depends on "how well [the companies] execute their business plans."
If GM and Chrysler had languished in bankruptcy, industry executives argue, things would have been far worse. "I think the supplier industry would have collapsed and, for that matter, the U.S. economy," said Matthew Simoncini, chief financial officer of seat maker Lear Corp., which itself sought bankruptcy protection last July. "Ultimately the bailout has helped the suppliers. It allowed GM to remain viable, and the fact that it got back up and running quickly really helped the supply chain."
Lear spent about 125 days in Chapter 11 last year, three times as long as GM. Now it, too, is hiring. A plant in Hammond, Ind., that supplies seats to Ford Motor Co. recently said it was adding about 250 more workers to the 170 employed there.
In Rogersville, Tenn., and Marion, Va., plants that make steering components recalled many workers once it became clear that Chrysler was staying in business. A Tenneco Inc. factory in Litchfield, Mich., recently rehired the 86 people it let go last year. TRW Automotive Holdings Corp., owner of the Rogersville and Marion plants, is also hiring at a Saginaw, Mich., plant that supplies GM.
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