The news that General Motors and Chrysler paid back a bunch of billions they borrowed from the U.S. government is encouraging to rubber industry companies that supply the auto makers.
It's a sign that the two weak sisters of the Detroit 3 are showing improvement. But it's not the second coming, not the “turnaround” the Obama administration is crowing about. Just as the government-backed bankruptcies of GM and Chrys-ler and subsequent government ownership of 61 percent of GM wasn't a step into socialism, as opponents of all things Obama claimed.
All that is just hyperbole, the stock and trade of politics.
The proper response to the auto makers' loan payoff is, “that's nice.” A tight smile, a nod, and now we'll wait to see how things play out over the next several years.
People in general and Americans in particular want instant gratification. They won't get that with the hoped-for revival of the American auto industry. It took a long time for the auto makers to slide into this morass, and they won't be getting out of it anytime soon.
At least there is some positive news, such as Chrysler posting a first-quarter operating profit of $143 million, Ford shares selling at their highest level in five years, and GM investing $1.5 billion in plants since leaving bankruptcy.
The naysayers have 36 billion reasons, as in dollars, to point to. That's the amount of the bailout money for the auto industry that taxpayers are expected to lose. But the alternative to the bailout was the risk of making the worst recession since the Great Depression into Great Depression II.
Many rubber companies suffered, and some fell, when GM and Chrysler escaped their obligations through Chapter 11. At least there are survivors serving the auto industry, which might not have been the case if those two huge customers disappeared.
What the automotive rubber processor needs is for the Detroit 3 to succeed in creating vehicles people need and want—not gas-guzzling SUVs, but fuel-efficient, green machines the public will embrace. Their plans so far look good, with new products like the Fusion hybrid and plug-in GM Volt, and eventual Fiat-technology-infused Chrys-ler products as possible winners.
If the Detroit 3 succeeds, so should automotive suppliers. They haven't won yet, but at least they still are in the game.
Noga is the editor of Rubber & Plastics News.