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TheStreet Open House

Obama's Big Convention Mistake: Touting Manufacturing Strength

A previous version of this article stated that bailouts of GM and Chrysler totalled $62 million. The correct amount was $62 billion.

CHARLOTTE, N.C. ( TheStreet) -- Observers at this week's Democratic National Convention couldn't travel anywhere in Charlotte without stepping over a mound of rhetoric that exalted President Barack Obama for strengthening U.S. manufacturing.

But Tuesday's ISM Manufacturing data that revealed a third straight month of contraction and Friday's jobs report that showed the sector shed 15,000 jobs in the same month told a different story.

The ISM survey peaked in January 2011 and has sloped on a downward trend since then.

"After a decade of decline, this country created over half a million manufacturing jobs in the last two and a half years," Obama said Thursday night.

Bill Clinton stated a similar line in his convention speech on Wednesday and said that the manufacturing sector was the strongest it had been since 1990.

The main example pushed by Democrats during the convention to praise manufacturing growth was the U.S. automotive industry, which during the Great Recession was on the verge of total collapse before Obama and his so-called car czar Steven Rattner decided to issue government-backed bailouts that totaled about $62 billion to save General Motors (GM) and Chrysler.

Obama regularly calls the GM and Chrysler rebounds as American success stories, but he also has left out some details from the stump speeches.

Though growing, shares of GM are trading about 44% below their IPO price of $33.

Chrysler has paid back all of its bailout money, but the company isn't American-owned anymore, as Italian carmaker Fiat manufactures the former Detroit brand.

Manufacturing heavily benefited from a piece of 2010 legislation -- called the Tax Relief, Unemployment Insurance, and Job Creation Act -- that gave 100% depreciation on new equipment in 2011 and 50% depreciation in 2012. When accelerated depreciation expires at the end of this year, analysts have said they are skeptical of what could happen to the sector.

China excited Asian markets on Friday when Beijing announced a slew of new infrastructure projects to jump-start the economy through a massive mobilization of the manufacturing sector there. It would be unwise to assume the United States could leap into a similar project to stimulate the economy, but recent numbers show that a slowing in the American automotive industry has weakened the manufacturing sector overall.

Democrats primarily communicated a platform of social issues to connect with party base voters, but independents may care more during this election cycle about their finances in this gloomy economy than anything else.

When most of the major prime-time speakers at the Democratic National Convention pointed to economic issues, they turned to the success story of Obama's turnaround of Detroit and the bump in manufacturing jobs.

President Obama pledged to add 1 million new manufacturing jobs in his second term. But recent data has suggested that the sector isn't healthy anymore and could be headed back to weaker days.

-- Written by Joe Deaux in Charlotte, N.C.

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