Blog: Dave LeggettObama - good for Detroit?

Dave Leggett | 5 November 2008

As the news sinks in that the next US president will be Barack Obama after all, I must admit that I am wondering how Detroit feels about it from the rather narrow viewpoint of whether or not he's good for the auto industry - or at least a net gain over what the alternative would have been.

Of course, there's the wider debate about economic policy and dealing with depressed demand. That debate will run and run, but I guess a Democrat administration might be more inclined to use the lever of public spending to stimulate economic activity in times of recession. And that, the conventional theory goes, means a bigger market for lots of capital and consumer goods, including vehicles. But then Republicans might say that is counter-productive because it means higher taxes and that chokes the economy. Hey, let's put that to one side. If anything, maybe we're into crisis management on the US economy given the backdrop of the deep financial crisis, traumatised consumers and some of the structural economic problems faced by the US, regardless of who's in charge. And it sounds like the state of the economy was a pretty decisive factor in this election (I would guess any Republican candidate would have had a tough job convincing voters that the economy requires more of the same direction it has been getting - whether that is fair or not).

But what about auto industry specifics? I understand Obama may be pretty sympathetic to the use of federal support for Detroit - the US$25bn cheap credit to 'aid investment in more fuel efficient vehicles' may be doubled for starters. What other initiatives might there be? And what about GM-Chrysler? Will federal funds be found to help make that deal happen and pay for the huge restructuring costs (and now the election is out of the way, the next wave of job losses can be rolled out)?

After what has happened to the US market and the decline of the Big Three, the situation is looking a little desperate. Folding Chrysler into GM might look like the best way to preserve something, with federal funds in the background (if trillions can be spared to support banks, the man on the street says, what about protecting auto industry jobs? - fine, except that loads of jobs still have to go anyway because there simply aren't enough sales out there - and it's still structural not just cyclical - and that's never an easy pill to swallow). 

For any politician, talking the talk in opposition is one thing. But once you are voted in, expectations at a slightly hysterical high, it's time to start walking the walk. There's still a recession coming. BO might want to get busy with some of the bad stuff quickly so that memories of that are fading in the hoped for better times four years out when re-election is due.  

I wonder if he's planning a grand initiative on electric cars and renewable energy? Didn't George W do some mighty fine political grandstanding on hydrogen cars a while back? What happened to that?

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