AdWatch: Romney ad raps Obama for auto layoffs

WASHINGTON (AP) ? TITLE: "Dream"

LENGTH: 30 seconds.

AIRING: Ohio.

KEY IMAGES: Al Zarzour, who owned a dealership in Lyndhurst, Ohio, says: "Grew up here in Lyndhurst, started 1972, selling cars." A narrator says that in 2009, under the Obama administration's bailout of General Motors, Ohio dealerships like Zarzour's were forced to close. Images of a vacant auto dealer showroom floor and an empty dealer lot fill the screen.

"I received a letter from General Motors," Zarzour says. "They were suspending my credit line. We had 30-some employees that were out of work. My wife and I were the last ones there. You know, it was like the dream that we worked for, and that we worked so hard for, was gone."

ANALYSIS: The ad aired by Romney's campaign and the national Republican Party attacks President Barack Obama's support for the auto industry bailout by focusing on an Ohio GM dealer forced to close in 2009. It was released Wednesday as Obama campaigned in Ohio, a battleground state.

The ad blames the administration for dealership closures across Ohio, ignoring the fuller picture of what happened in the auto industry in recent years and the government's role.

The auto bailout was enacted by Republican President George W. Bush in 2008 and continued under Obama, sending government money to GM and Chrysler. Romney says the automakers should have been left to go through bankruptcy without government assistance.

GM and Chrysler went into bankruptcy on the strength of the bailout. Neither Bush nor Obama believed the automakers would have survived without that backup from taxpayers.

Romney's very different prescription was to save the automakers by having them go through bankruptcy, with the government guaranteeing financing afterward and backing up new-car warranties. Those government loan and warranty guarantees would have been far cheaper than the nearly $85 billion bailout. Given the chaos in private lending institutions at the time, there's a good deal of skepticism that Romney's approach would have worked.

The bailout issue is important in at least two general election swing states: Ohio and Michigan, where the auto bailouts are popular.

Romney's ad blames Obama for something GM had sought for years ? cutting its dealer network to boost profitability. It's the kind of calculated move Romney was so familiar with in his work turning around struggling businesses as CEO at private equity firm Bain Capital.

GM, along with other U.S. auto manufacturers, had been stuck with a post-World War II dealer network that was oversaturated in big cities and inner suburbs. As more affluent families moved to outer suburbs, those close-in dealers had to fight for a shrinking piece of the market.

Nowhere was this more apparent than in Cleveland. The dealer featured in the ad is from Lyndhurst, a suburb on Cleveland's east side. Cleveland has many suburbs, and nearly all had a GM dealer. Buyers would play one dealer off another to get discounts, so the dealers wouldn't make much money on sales. That meant they had little to invest in their buildings or to advertise, hurting GM's competitive position.

At the same time, Honda and Toyota were building shiny new dealerships in more affluent areas. There were fewer of them, so they made more money and they advertised a lot more. Plus, their buildings were more modern than the GM dealerships in older neighborhoods.

GM wanted to cull the ranks to make the remaining dealers healthy. The company was able to do it while going through the government-mandated restructuring to fix its business. While a lot of longtime dealers lost their franchises, it made good business sense. Now GM's dealers are making money and investing in buildings and advertising, and the company posted record profits last year.

___

Krisher reported from Detroit.

EDITOR'S NOTE _ An occasional look at the claims in political advertising.

Source: http://news.yahoo.com/adwatch-romney-ad-raps-obama-auto-layoffs-202618932.html

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