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Obama takes auto bailout victory lap


TRIP TO TOUT TURNAROUND


Industry finally turning a profit, adding jobs


by Michael D. Shear and Peter Whoriskey


detroit — The government’s bailout of the American auto in- dustry last year sparked political hand-wringing about the end of capitalism and allegations that President Obama aspired to be CEO of what critics dubbed “Gov- ernment Motors.” After the president forced the


firing of General Motors chief ex- ecutive G. Richard Wagoner Jr., Republican Sen. Bob Corker (Tenn.) proclaimed Obama’s ac- tions “truly breathtaking” and said the government ownership roles at Chrysler and GM “should send a chill through all Americans who believe in free enterprise.” But a year and a half later,


many of the critics have retreated from their sharpest attacks as they watch the auto industry once again turn a profit and begin add- ing jobs in communities such as Detroit, which desperately need them.


Obama’s visit to a Chrysler plant in Detroit Friday was de- signed as a victory rally — com- plete with campaign-style trap- pings — aimed squarely at Repub- lican critics who had attacked the auto bailouts as government take- overs. A feisty Obama was welcomed with loud applause by about 1,500 autoworkers inside the plant that makes the Jeep Grand Cherokee, a vehicle the president said was the first new car he ever owned. If his critics had won, he said, the plant would have been shuttered and dark.


“If some folks had their way, none of this would be happening,” he said, calling out the “leaders of the ‘just-say-no crowd’ in Wash- ington” and sparking loud boos when he added that “one of them called it the worst investment we could make.” There’s no satisfying some, such as radio host Rush Lim- baugh, who this week referred to GM as Obama Motors. And the auto turnaround is not enough to fix places such as Detroit, where 30 percent unemployment has ravaged the city.


But as Obama arrived Friday to


trumpet the industry’s progress, Corker refrained from saying that the bailouts were bad for the country. He says the administra- tion’s methods were “heavy-hand- ed” but also takes credit for help- ing to shape the bailout. He prod- ded the Obama administration to force the companies to lessen their debt and achieve a more fa- vorable union agreement. The White House is eager to tell


JIM WATSON/AGENCE FRANCE-PRESSE VIA GETTY IMAGES


President Obama greets an assembly line worker as he tours a Chrysler plant in Detroit. His trip to Michigan was aimed at Republican critics who had attacked the auto bailouts as government takeovers.


a success story ahead of the con- gressional midterm elections this fall. The president’s Friday visit and another to a Ford plant out- side of Chicago next week are in- tended to tell that story more widely to potential voters. Obama started at Chrysler’s Jef- ferson North plant, where Jeep Grand Cherokees are being built, and then toured a GM plant that will produce the company’s first electric car, the Volt. Both are churning out cars, adding shifts of workers and helping to keep Rust Belt suppliers in business. “In the year before these bank- ruptcies, these companies lost al- most 340,000 jobs,” said Ron Bloom, the administration’s top auto official. “In the year since then, 55,000 jobs have been added to these companies. If we hadn’t stepped in when we did, most ob- servers believe at least a million jobs would have been lost.” Preliminary figures suggest


that auto industry employment in the United States might reverse a decade of decline. In 2000, 1.3million people were directly employed in the motor vehicle and parts industries, according to the Bureau of Labor Statistics. But by last summer, that figure had fallen to about 626,000. Since then it has begun rising and stood in June at almost 690,000. The auto industry financing


program, which began under the Bush administration, extended about $85 billion to General Mo- tors, Chrysler, GMAC and Chrys- ler Financial. Those investments were justified by the Obama ad- ministration as a means of saving an estimated 1million jobs. Wag- oner’s removal as chief executive was justified as necessary to clear


A car making comeback


Te auto industry added 55,000 jobs since employ- ment bottomed out last summer, a reversal that the Obama administration is attributing to the success of last year’s government bailout.


1.32 million 680,0,900


Number of peop employed in the motor


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motor vehicle and parts industries


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General Motors and Chrysler col- lapse might have cost more, ac- cording to some analysts. The Center for Automotive Research has estimated that the closures would have cost the government $27 billion in lost tax revenue, mostly personal income tax, and about $10 billion for benefit pay- ments such as unemployment. “In the middle of the worst re- cession we’ve had in a long time, it would have been devastating,” said Kim Hill, associate director of research at CAR. Previewing his campaign-year


SOURCE: BLS


’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’0 ’109 THE WASHINGTON POST


the way for radical change at the automaker. (Wagoner is a Wash- ington Post Co. director.) Most of the federal money is ex-


pected to be repaid, but the pro- gram’s ultimate cost was estimat- ed by the administration in March to be $24.6 billion. Administra- tion officials say that the expected loss will fall as the companies in which the United States has an ownership stake grow in value. General Motors is expected to


have a public offering of stock as early as August; Chrysler’s is ex- pected next year. The government investments could be repaid then. Even if the auto rescue costs the government $24.6 billion, letting


rhetoric, Obama made it clear that he will use the auto turn- around as a centerpiece of the ar- gument that his economic pol- icies have fueled the recovery. “Don’t bet against the Amer- ican worker,” he said, his voice ris- ing over cheers from the audience at the Chrysler plant. “Don’t bet against the American people. . . . It’s going to take some time to get back to where we want to be, but I have confidence in the American worker . . . I have confidence in this economy.” That message was well-re- ceived in the cavernous plant, where many of workers described a welcome turnaround in morale from a year or two ago, when workers took buyouts because they feared the end was near. “The morale is different now,” said Erik Williams, 38, who has worked at Jefferson North since 1994. “When you know you are on the brink and you come back from that, it puts it in a different per- spective.”


shearm@washpost.com whoriskeyp@washpost.com


Whoriskey reported from Washington.


Lithium batteries could face new restrictions After fires and recalls,


DOT proposes deeming them hazardous cargo


by Jia Lynn Yang


The lithium-ion battery quietly fuels modern life. It powers our iPhones, iPads, BlackBerrys and laptops. It’s in the next round of electric cars coming to market this year. It also has a controversial safe-


ty record peppered with fires and recalls. Now the Department of Transportation wants to toughen rules for how the batteries — and devices containing them — are shipped on cargo planes. If final- ized, the proposed changes would require shippers to treat iPhones as hazardous materials, on par with flammable paint or dry ice with the full weight of reg- ulation and added costs that come with that classification. Companies such as Apple, UPS and Best Buy say they support stricter safety standards but are worried the rules go too far and could wreak havoc on supply chains. They warn that the changes could raise prices for consumers. And it’s a testament to the ubiquity of the lithium-ion battery that the dispute over the transportation proposal has now embroiled everyone from trade partners such as Israel and South


Korea to airline pilots, medical device makers and the National Funeral Directors Association. The Pipeline and Hazardous


Materials Safety Administration, which is part of DOT, said it’s in the middle of rulemaking and would not specify when a final decision is expected. But retailers are concerned that if PHMSA de- cides to green-light the rules, the regulations could mean trouble for Christmas shipments. Lithium-ion batteries have


skyrocketed in popularity be- cause they’re lighter and smaller than other batteries. More than 3.3 billion lithium-ion cells were shipped in 2008, according to in- dustry estimates, up from 1.5 bil- lion in 2005. They have also been known to


ignite because they contain a small amount of flammable sol- vent. If the batteries overheat or short-circuit, in rare cases the solvent can react and catch fire. Tech companies such as Dell


and Lenovo have issued recalls in recent years for laptop batteries at risk of overheating. Policymakers have since turned their attention to ship- ments of these batteries, espe- cially after a 2006 incident at Philadelphia International Air- port in which a UPS cargo plane containing lithium batteries caught fire. The National Trans- portation Safety Board could not determine the exact cause of the fire.


Such incidents have been enough to alarm airline pilots, however, who have taken up the cause of tightening rules with the support of Rep. James L. Ober- star (D-Minn.), chairman of the House transportation commit- tee.


Regulators currently consider


any package containing a lithi- um-ion battery to be hazardous but exempt small batteries, such as those contained in cellphones. The PHMSA has proposed re- moving that exemption. Any- thing containing the batteries would have to be specially pack- aged and labeled, and anyone shipping it would have to receive hazardous-materials training. Companies say regulators should focus on better enforce- ment of existing rules, rather than adding new ones. Industry groups say that in every battery case that has been cited as suspi- cious, the problem was that peo- ple were not following the rules. The new regulations could af-


fect a massive web of companies, including manufacturers, ship- pers and retailers. They say costs would be staggering. UPS told PHMSA that complying with the rules would cost the company at minimum $264 million in the first year. And the company said each subsequent year would cost an additional $185 million. Best Buy submitted a long list of products that would be affect- ed, including portable GPS devic-


10-YEAR TREASURY UP $6.70 PER $1,000, 2.90% YIELD


CURRENCIES $1 = 86.42 YEN; EURO = $1.30 DIGEST ENFORCEMENT


Delta to pay settlement of $38 million Delta Air Lines will pay a


$38 million fine to settle criminal accusations that the cargo unit of Northwest Airlines conspired to fix prices, the Justice Department said Friday. Northwest met with other air-


lines at least from 2004 to 2006 to fix cargo prices between the United States and Japan, accord- ing to the charge filed Friday in U.S. District Court in Washing- ton. Meetings were also held to make sure the haulers were com- plying with the agreed-upon rates, according to the charge. At the time, Northwest ran a stand-alone cargo unit with Boe- ing 747s that flew to Asia. It was the only U.S. carrier with a dedi- cated freighter fleet, but it was shut down last year. Airlines of- ten carry cargo in their bellies


ALSO IN BUSINESS


 Chevron’s profit triples in 2nd quarter: Chevron said Fri- day that its second-quarter earn- ings tripled on better refining margins and higher prices for oil and natural gas. The company re- ported net income of $5.4 billion for the three months ended June 30, up from $1.7 billion in the comparable period last year. Rev- enue jumped 32 percent, to $53 billion. The results easily beat most


Wall Street expectations. The San Ramon, Calif., company is the lat- est oil major to report big gains in the second quarter as demand for oil and gasoline has pushed prices higher.  Bernanke’s assets rise: Fed- eral Reserve Chairman Ben S. Bernanke’s personal assets rose by as much as 31 percent last year as stocks rebounded. The central bank chief and his family owned financial assets val- ued at $1.15 million to $2.48 mil- lion last year, a higher range than


MERGERS & ACQUISITIONS


the $852,000 to $1.9 million in 2008, according to an annual fi- nancial disclosure released by the Fed on Friday. His two largest as- sets are retirement accounts, list- ed as TIAA Traditional and CREF Stock Large Cap Blend, valued in a range of $500,001 and $1 mil- lion.


Bernanke, 56, who began a sec- ond four-year term in February, received a salary last year of $196,700, an amount set by Con- gress.  Madoff family should help victims, investors’ trustee says: Companies owned by members of Bernard Madoff ’s family should pay tens of millions of dollars to help victims of his Ponzi scheme, the trustee recovering funds for investors said in three lawsuits. Family members used the money to fund personal business ven- tures, said trustee Irving Picard in the complaints filed Thursday in U.S. Bankruptcy Court. — From news services


along with luggage. Northwest Airlines, a unit of Delta Air Lines., pleaded guilty to the charge, the Justice Depart- ment said. Delta bought North- west in 2008, and the two carriers have been combined. In a statement, Delta said


Northwest had “terminated the employment of the individual who it believed had primary re- sponsibility for the conduct in question.” Delta said Justice did not allege misconduct by any cur- rent or former officer or director at Northwest or Delta. The Justice Department says more than a dozen airlines have pleaded guilty to price fixing charges and paid more than $1.6 billion in fines.


Delta shares rose 19 cents to close at $11.88.


SATURDAY, JULY 31, 2010


Disney sells Miramax Films


Walt Disney is selling Miramax Films to a group of investors for $660 million, marking a new phase for a studio that helped push inde- pendent movies into the mainstream. The deal, announced Friday, ends speculation that founders Bob and Harvey Weinstein could regain control of the studio they launched. With ownership of the studio pass the rights to Oscar winners that include “Shakespeare in Love,” “Chica- go” and “No Country for Old Men” (with Javier Bardem, above).


es, portable DVD players and TVs, cellphones, cordless head- phones, universal remote con- trols, cameras, camcorders, even electric razors and toothbrushes. The funeral directors group


says the proposed regulations would affect their industry, as well, because many deceased that are flown to funerals have pace- makers and defibrillators, which also contain the batteries. Because many of the affected


devices are flown around the world, the proposed rules have also raised the alarm of some U.S. trade partners, who are worried the rules could act as an unfair trade barrier, since many prod- ucts would be harder to ship via air to the United States. “The proposed regulation would threaten the ability to im- port into the United States bat- teries and — more significantly — products using those batteries, such as medical devices and wa- ter meters,” said a letter to DOT submitted by Israel’s Ministry of Industry, Trade and Labor. Airline pilots insist, however,


that regulators move forward with their proposal. If a battery “overheats on its own and causes a fire,” said Mark Rogers, director of the danger- ous-goods program for the Air Line Pilots Association, “you need to make sure that situation doesn’t become catastrophic.” yangjl@washpost.com


PostLeadership JENA MCGREGOR Excerpt from views.washingtonpost.com/leadership Thou shalt not worship corporate idols


Another day, another recall. Toyota, long revered as the gold standard for manufacturing efficiency and quality, announced on Thursday a voluntary recall of Avalon and Lexus models due to steering problems, bringing the total of recalled vehicles to 9 million since October. If there’s a lesson to be learned here, it’s the following: Thou shalt not worship corporate idols. Pardon my biblical reference, but it’s a problem of epic proportions. Consultants, professors and management gurus create pagan gods out of corporations, only to have them tumble off their pedestal, often for the very thing that got them there. But after a firm loses luster, the experts who built it up rarely examine what brought it down. General Electric, that mecca of management expertise, suffered a credibility blow during the financial crisis when executives missed forecasts and racked up losses in its GE Capital arm. Meanwhile, Goldman Sachs, a firm that has been hailed as one of the best companies for leadership development, recently settled civil charges that it defrauded investors. But Toyota is in a class by itself. A veritable industry has been built up around teaching “The Toyota Way.” Countless consulting firms have sprung up to teach kaizen, Toyota’s philosophy of continuous improvement. The company’s in-house training center, the University of Toyota, has even opened its doors to outsiders, using simulations to teach everyone from the Defense Department to the Los Angeles Police Department. Toyota’s system, when applied well, certainly increases efficiency, reduces defects and cuts waste. Whatever may have caused the recent string of problems and recalls — made worse by the company’s clumsy crisis communications — the Toyota production system clearly played a big role in helping the company become the world’s largest automaker. But it didn’t do it alone, and therein lies the problem. Good leaders and a strong culture built up Toyota’s reputation for quality. Poor leaders, the company president has said, were a key reason for bringing it down.


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