Close observers of the tableau presented at President-elect Barack Obama's Friday press conference saw unequivocal evidence that help from the U.S. Government is coming to the Detroit-based auto industry.
Just over Obama's right shoulder was Michigan Governor Jennifer Granholm. If we've learned anything about Obama, it's that nothing is left to chance. So Granholm was intentionally positioned to be included in every single picture taken of the newly minted president-elect at his first press conference.
Granholm, Windsor-born by the way, helped deliver Michigan to the Obama camp during last week's election. Remember, Michigan went early for Obama, so early John McCain pulled out to spend his money elsewhere. On election night, Obama won Michigan by 16 percentage points.
Granholm also helped Vice President-elect Joe Biden prepare for his debate with Gov. Sarah Palin – by standing in as Palin in mock debates.
Granholm was there to send a message, the message being that Obama knows he owes Michigan and the payoff is coming. Fast. Just in case anyone missed the visuals on Friday, Obama and the Democrats went to work on the weekend, too.
Obama's incoming chief of staff, Rahm Emanuel, called the Detroit auto companies “essential” to the U.S. economy in interviews Sunday. House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid (Democrats, of course) sent a letter Saturday to President Bush, calling on him to release some of U.S. Government's $700 billion in aid paid to help the auto companies, too.
No one seems quite sure how aid for Detroit will materialize, but it's coming, no doubt about it.
This, of course, has huge implications for Canada. If the U.S. Government helps, Canada's government will be forced to, as well. And, indeed, as the Globe's Heather Scoffield and Greg Keenan wrote in today's paper, Finance Minister Jim Flaherty seems amenable to some sort of aid package.
My sources at GM say loan guarantees to offset the crushing damage of the credit crisis, rather than strict bailout money, would make all the difference in the world, and those loans would be paid back.
Here's what's at stake. The Center for Auto Research says, "Should all of the Detroit Three's U.S. operations cease in 2009, the first year total employment impact would be a loss of nearly 3 million jobs in the U.S. economy...Lost tax revenue between 2009 and 2011 would be an estimated $156.4 billion. (U.S. dollars).”
In Canada, 126,000 people are employed in the auto parts and auto assembling businesses. Several hundred thousand more jobs are tied directly or indirectly to the auto industry in Canada. Significant job losses related to the auto industry in Canada would result in significant reductions in tax revenue.
Help is coming, but which of the Detroit Three has earned it the most?
I'd argue Ford; it is clearly on the right track. Ford's quality, by many objective measures, is the best of the three and very close if not on par with Toyota and Honda, the industry leaders.
Ford is committed to remaking itself as global auto maker with one brand and a diversified lineup that is not ridiculously over-weighted in one segment of the market – as it had been in pickups and sport-utility vehicles. A complete overhaul of management seems to have made a tremendous difference.
General Motors has improved its products tremendously over the last half dozen years, though gains on the quality front seem to have stalled. Overall, GM has very competitive vehicles in almost every segment and some class winners, too.
But GM just has too many brands for a car company with 20 per cent market share in North America. Until GM bites the bullet and eliminates several brands – and the costs that come with supporting eight brands in North America – this company will never see daylight clearly.
