Auto industry bailout's success still in question
A massive selloff in the stock market Wednesday was attributed to a dismal monthly jobs report by a well-known payroll processing firm. It stated that only 38,000 private-sector jobs had been added in May, significantly less than the 175,000 economists were predicting.
The Obama administration has been crediting the government bailout of General Motors and Chrysler for creating or saving jobs. While the industry is making a comeback, the latest numbers from the big three U.S. automakers show sales last month were flat.
The administration said Wednesday taxpayers will lose about $14 billion on the bailout. CBS News correspondent Dean Reynolds reports that there are questions about how big of a job creator it will really turn out to be.
On the surface, the U.S. auto industry appears to have turned a corner. Ford is thriving. Chrysler and General Motors are out of bankruptcy and showing off lines of popular new models since being bailed out by the federal government.
The industry is reacting as though the May sales numbers, which showed a slight cooling in the car market, are just a blip on a rosy horizon.
"Based on what we're seeing right now, the overall industry -- even with higher gas prices -- is continuing to show strength," said Don Johnson, G.M.'s vice president of sales.
The White House is underlining the view that its rescue of the auto industry is a big success. Officials say taxpayers will be on the hook for only a third of what pessimists once believed.
Indeed, a bullish G.M. is now investing $2 billion in 17 facilities across eight states and creating or restoring 4,000 jobs. Ford will add more than 7,000 jobs this year and next. Chrysler has pumped $3 billion into facility upgrades.
In California, one of the larger suppliers of new car wheels to the big three echoed the good word recently.
"Over the last year, we've hired 600 to 800 employees and we're looking to hire 200 to 300 more," Steven Borick,with Superior Industries International.
Still, only one-third of the 3,000 people he was forced to let go during the recession are back -- an example of a troubling number that punctures talk of a real recovery. Consider that of the 331,000 auto industry jobs lost during the recession, only 76,000 have returned.
In the dark recesses of Bob Fricano's Chicago auto supply business, there is no talk of turning the corner. Fricano said his A&B Automotive Supply company is past thinking about layoffs,
"It's going to be a possibility of going out of business," Fricano said.
Fricano's business is down 15 percent from a year ago, and 30 percent from two years ago. A small link in the automotive supply chain, Fricano's business employs five workers. He says for all the happy talk from Detroit, the sputtering U.S. economy is forcing cutbacks. Fricano has even been forced to cut his own salary.
For the people at the end of the supply chain, the benefits at the top haven't reached them yet.
