Mich. race shifts into gear amid auto woes

Less than a week from Election Day, rumors of a potential merger between Chrysler and General Motors remain a large, unknown variable looming in Michigan’s hotly contested 9th district. 

The district, represented by longtime Rep. Joe Knollenberg (R), is home to Chrysler’s corporate headquarters, where uncertainty in the company’s future may translate into additional uncertainty in Knollenberg’s difficult reelection bid against Democrat Gary Peters.

{mosads}“It’s a central issue here in Michigan, and in everything you talk about,” said Peters spokesman Clark Pettig. “When you talk about jobs and the economy, you’re talking about the auto industry.”

 “It's always part of the story we tell,” said Knollenberg’s campaign spokesman Nate Bailey. “It's absolutely part of our message and part of what folks want to hear from him.”

Still, both campaigns seem to indicate they have little idea how a significant development — which analysts believe may well come before Nov. 4 — would affect the race. Cabinet officials have been in negotiations with GM, Chrysler, and Ford officials in recent days, trying to speed up payouts on a $25 billion package in loan assistance to the Big Three. Reports have also indicated that the White House may be exploring options to finance a GM acquisition of Chrysler.

The White House has been coy about what, if any, deal is being explored.

“The discussions on whether or not any companies decide to merge are discussions that they are having between themselves,” White House spokeswoman Dana Perino said in Tuesday’s briefing. “We've been talking to them at various levels and at different departments, including Energy, Treasury and Commerce.”

A deal may likely see the government financing GM’s acquisition of Chrysler using bailout funds, possibly taking an equity in GM, said John Wolkonowicz, senior automotive analyst for North America for IHS Global Insight. “It would be cheaper to assist GM in doing this than to let Chrysler or even GM go down,” he said.

Chrysler spokeswoman Shawn Morgan declined to comment for this story.

Both Knollenberg and Peters, though, have been quick to emphasize their involvement in the process.

“He asked the White House this week to inject liquidity into the automotive financial industry,” Pettig said, also pointing out that Peters had written President Bush and Treasury Secretary Henry Paulson earlier this year to ask for the loan package.

For his part, Knollenberg’s high-profile involvement in the negotiations may be critical to his reelection, while taking time away from the campaign trail.

“They talk about the incumbency advantage, but it comes with disadvantages, too,” Bailey said. “It's a balancing act. There will be a lot of times where he's in the car to an event and be on the phone with [GM CEO] Rick Waggoner.”

“I’ve seen Knollenberg’s name in the Detroit News frequently,” Wolkonowicz said. “Obviously, in his own district, that’s a good thing — there’s no animosity for the American auto industry in southeast Michigan.”

But political credit or blame could be decisive in this race, where the last independent poll showed a tie. That poll, conducted Sept. 30 through Oct. 2 by Mitchell Research & Communications, showed the race at 43-43 with a 6 percent margin of error. Subsequent Democratic polls have shown Peters with an advantage over Knollenberg.

The stakes are high in the 9th district, where automotive jobs are the base of the economy. The Lansing, Mich.-based Anderson Economic Group estimated that a merger of the two companies may result in shedding 25,000 to 35,000 jobs.

Wolkonowicz said a merger announcement would come “almost certainly” before Election Day. “There’s quite a bit of belief that it will be announced before next Tuesday,” he said.