Stimulus buys stability

Much of the benefit is not in creating jobs, but in saving jobs; 'without it, things would be worse'

The Associated PressJune 8, 2009 

— Washington is paying hundreds of millions of dollars to build new, cleaner-burning buses, but don't scour the want ads looking for a burst of job openings soon at major manufacturers or suppliers.

The bus money, like many other programs in the $787billion stimulus plan, is having the less glamorous and harder-to-quantify effect of keeping workers employed, providing a slight buffer from the recession to some in the auto industry.

At the White House, where saving jobs always was as much a priority as creating jobs, the bus industry is a success story. But it also shows how hard it is to account for that success, especially in an industry that keeps shedding jobs despite the stimulus.

"The stimulus has been a plus, but it's just, how do you do the math?" said Patrick Scully, chief commercial officer at Daimler Buses North America Inc., which operates plants in New York and Greensboro, N.C. "You could say, without it, things would be worse."

The dollar signs in the stimulus law seem to foreshadow a bull market for companies that build buses, engines, transmissions and axles. Connecticut has budgeted $71million to buy hybrid buses. New Jersey will spent $35million plan to rehabilitate its fleet. Rural Oklahoma counties and vacation spots in Cape Cod, Mass., have bus projects in the works.

Because local governments are strapped for cash, some companies braced for a slowdown in transit spending. The stimulus is more likely to keep things stable than send sales booming, industry executives said.

"The initial forecasts from a number of customers looked pretty bad," said Jack Schimenti, vice president of Lincoln Composites of Lincoln, Neb., which makes fuel systems for bus manufacturers.

Thanks to the stimulus law, forecasts are more stable now. Schimenti expects stimulus-related orders to begin late this year.

At North American Bus Industries of Anniston, Ala., it's the same story.

"It helps preserve the jobs that we have," said Joseph Gibson, senior vice president for sales. "We don't have plans for any massive hiring. Right now we're just trying to maintain stability."

New Flyer Industries, a Canadian company that runs manufacturing plants in Minnesota, said its sales were up before the stimulus and the new spending will probably keep sales and employment stable. In March, an administration task force on the middle class, led by Vice President Joe Biden, held a session at a New Flyer bus garage in St. Cloud, Minn.

At Daimler Buses, Scully says he can already point to 200 bus orders with stimulus money, and he expects more soon. Sales forecasts for 2009 and 2010 are steady, he said. "I would guarantee you, without this stimulus bill, we would have to curtail our operations," he said.

That could be a campaign sound bite for President Barack Obama's re-election effort. The problem is, neither Scully nor Gibson, nor managers in countless other industries, have hard numbers on how many jobs were saved.

The White House says it has already created or saved 150,000 jobs, a number that is impossible to verify.

Progress is obscure

The bus industry also reveals a political truth for the Obama administration: Even in industries where the stimulus is working, White House job estimates will be overshadowed until the economy turns around.

For example, engine-maker Cummins stands to benefit from bus spending. The Columbus, Ind., company makes diesel and natural gas engines and is a major supplier for bus companies. Cummins also hopes to benefit from stimulus money to reduce pollution from old diesel engines.

But the slowdown in the auto market has been devastating. The company has cut 8,000 jobs worldwide since October, spokesman Mark Land said. A major customer, Chrysler, is in bankruptcy

The trucking industry has fallen dramatically, with thousands of companies going out of business last year and others scaling back their fleets.

So companies such as Cummins can both benefit from the stimulus and still predict significant revenue declines this year.

"It will certainly help, but we're not talking about hundreds of thousands of engines here," Land said.

This experience plays out repeatedly nationwide. When the White House says it has saved jobs, it's talking about companies such as Daimler, New Flyer and Cummins. The overall economy, meanwhile, has lost 1.3million jobs since the stimulus law was passed.

Obama has promised to create or save 3.5million jobs, but the White House is well aware that unless the economy turns around, voters are unlikely to give credit for economic models showing the stimulus was a success.

At Cummins, workers are rooting for the stimulus to work, Land said, not because of the small direct benefit but because of the potential indirect benefit.

"To the extent the stimulus is successful helping get the economy in the right direction, to the extent it helps the economy, helps our market, that's where we're going to benefit," Land said. "If that allows us to bring a few people back, then it will be fair to say then the stimulus was part of the solution."

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