Big Three Bailout
- Thread starter FreeBoost
- Start date
Warp6
Mine since '92
- Joined
- May 25, 2001
HA! I love it! I am def not for the bailout. They got themselves into this mess let them clean it up. If the gov bails them out then every other industry in trouble needs bailing too. I'm in the furniture industry in NC. Our order rate has dropped 50% or more in the last 3 years. We're the lucky ones, we're still in business. People are hurting. Where's our bailout??
BetMinesFaster
Turbo LSX Trader
- Joined
- Aug 7, 2007
Imagine the unemployment rate if any of the big 3 were to close, think of all the dealerships and factory workers that would be out. The bailout only makes sense to stop the economy from tanking anymore. I belive that this will prompt a revision of the makes and models they produce, but the bailout needs to happen
John Larkin
Sublime Master of Turbology
- Joined
- May 25, 2001
I am against the furniture industry. 300% markup. Cut your prices. We aren't bailing you out.
Imagine the unemployment rate if any of the big 3 were to close,
That's the myth that the media is hyping.
They WOULDN'T CLOSE. Chapter 11 is reorginization, NOT closing. Airlines do it all the time, banks do it all the time, MANY large corps. do it all the time and they ALL stay in business while doing so.
- Joined
- Aug 20, 2001
I'm in the business..
..Here is a letter that a Ford dealership owner sent to a local editor, this is all factual info, no BS.
As I watch the coverage of the fate of the U.S. auto industry, one alarming and frustrating fact hits me right between the eyes. The fate of our nation's economic survival is in the hands of some congressmen who are completely out of touch and act without knowledge of an industry that affects almost every person in our nation. The same lack of knowledge is shared with many journalists whom are irresponsible when influencing the opinion of millions of viewers.
Sen. Richard Shelby of Alabama has doomed the industry, calling it a dinosaur. No Mr. Shelby, you are the dinosaur, with ideas stuck in the '70s, '80s and '90s. You and the uninformed journalist and senators that hold onto myths that are not relevant in today's world.
When you say that the Big Three build vehicles nobody wants to buy, you must have overlooked that GM outsold Toyota by about 1.2 million vehicles in the U.S. and Ford outsold Honda by 850,000 and Nissan by 1.2 million in the U.S. GM was the world's No. 1 automaker beating Toyota by 3,000 units.
When you claim inferior quality comes from the Big Three, did you realize that Chevy makes the Malibu and Ford makes the Fusion that were both rated over the Camry and Accord by J.D. Power independent survey on initial quality? Did you bother to read the Consumer Report that rated Ford on par with good Japanese automakers.
Did you realize Big Three's gas guzzlers include the 33 mpg Malibu that beats the Accord. And for '09 Ford introduces the Hybrid Fusion whose 39 mpg is the best midsize, beating the Camry Hybrid. Ford's Focus beats the Corolla and Chevy's Cobalt beats the Civic.
When you ask how many times are we going to bail them out you must be referring to 1980. The only Big Three bailout was Chrysler, who paid back $1 billion, plus interest. GM and Ford have never received government aid.
When you criticize the Big Three for building so many pickups, surely you've noticed the attempts Toyota and Nissan have made spending billions to try to get a piece of that pie. Perhaps it bothers you that for 31 straight years Ford's F-Series has been the best selling vehicle. Ford and GM have dominated this market and when you see the new '09 F-150 you'll agree this won't change soon.
Did you realize that both GM and Ford offer more hybrid models than Nissan or Honda. Between 2005 and 2007, Ford alone has invested more than $22 billion in research and development of technologies such as Eco Boost, flex fuel, clean diesel, hybrids, plug in hybrids and hydrogen cars.
It's 2008 and the quality of the vehicles coming out of Detroit are once again the best in the world.
Perhaps Sen. Shelby isn't really that blind. Maybe he realizes the quality shift to American. Maybe it's the fact that his state of Alabama has given so much to land factories from Honda, Hyundai and Mercedes Benz that he is more concerned about their continued growth than he is about the people of our country. Sen. Shelby's disdain for "government subsidies" is very hypocritical. In the early '90s he was the driving force behind a $253 million incentive package to Mercedes. Plus, Alabama agreed to purchase 2,500 vehicles from Mercedes. While the bridge loan the Big Three is requesting will be paid back, Alabama's $180,000-plus per job was pure incentive. Sen. Shelby, not only are you out of touch, you are a self-serving hypocrite, who is prepared to ruin our nation because of lack of knowledge and lack of due diligence in making your opinions and decisions.
After 9/11, the Detroit Three and Harley Davidson gave $40 million-plus emergency vehicles to the recovery efforts. What was given to the 9/11 relief effort by the Asian and European Auto Manufactures? $0 Nada. Zip!
We live in a world of free trade, world economy and we have not been able to produce products as cost efficiently. While the governments of other auto producing nations subsidize their automakers, our government may be ready to force its demise. While our automakers have paid union wages, benefits and legacy debt, our Asian competitors employ cheap labor. We are at an extreme disadvantage in production cost. Although many UAW concessions begin in 2010, many lawmakers think it's not enough.
Some point the blame to corporate management. I would like to speak of Ford Motor Co. The company has streamlined by reducing our workforce by 51,000 since 2005, closing 17 plants and cutting expenses. Product and future product is excellent and the company is focused on one Ford. This is a company poised for success. Ford product quality and corporate management have improved light years since the nightmare of Jacques Nasser. Thank you Alan Mulally and the best auto company management team in the business.
The financial collapse caused by the secondary mortgage fiasco and the greed of Wall Street has led to a $700 billion bailout of the industry that created the problem. AIG spent nearly $1 million on three company excursions to lavish resorts and hunting destinations. Paulson is saying no to $250 billion foreclosure relief and the whole thing is a mess. So when the Big Three ask for 4 percent of that of the $700 billion, $25 billion to save the country's largest industry, there is obviously oppositions. But does it make sense to reward the culprits of the problem with $700 billion unconditionally, and ignore the victims?
As a Ford dealer, I feel our portion of the $25 billion will never be touched and is not necessary. Ford currently has $29 billion of liquidity. However, the effect of a bankruptcy by GM will hurt the suppliers we all do business with. A Chapter 11 bankruptcy by any manufacture would cost retirees their health care and retirements. Chances are GM would recover from Chapter 11 with a better business plan with much less expense. So who foots the bill if GM or all three go Chapter 11? All that extra health care, unemployment, loss of tax base and some forgiven debt goes back to the taxpayer, us. With no chance of repayment, this would be much worse than a loan with the intent of repayment.
So while it is debatable whether a loan or Chapter 11 is better for the Big Three, a $25 billion loan is definitely better for the taxpayers and the economy of our country.
So I'll end where I began on the quality of the products of Detroit Before you, Mr. or Ms. Journalist continue to misinform the American public and turn them against one of the great industries that helped build this nation, I must ask you one question. Before you, Mr. or Madam Congressman vote to end health care and retirement benefits for 1 million retirees, eliminate 2.5 million of our nation's jobs, lose the technology that will lead us in the future and create an economic disaster including hundreds of billions of tax dollars lost, I ask this question not in the rhetorical sense. I ask it in the sincere, literal way. Can you tell me, have you driven a Ford lately?
Enjoy...Yes I work for FORD. The ignorance the public has on the US automakers is pretty alarming..
OH ya..I am for getting rid or restructing rediculous Union contracts, but letting GM go under would do things to this ecomony that most of us could not imagine IMO.
..Here is a letter that a Ford dealership owner sent to a local editor, this is all factual info, no BS.
As I watch the coverage of the fate of the U.S. auto industry, one alarming and frustrating fact hits me right between the eyes. The fate of our nation's economic survival is in the hands of some congressmen who are completely out of touch and act without knowledge of an industry that affects almost every person in our nation. The same lack of knowledge is shared with many journalists whom are irresponsible when influencing the opinion of millions of viewers.
Sen. Richard Shelby of Alabama has doomed the industry, calling it a dinosaur. No Mr. Shelby, you are the dinosaur, with ideas stuck in the '70s, '80s and '90s. You and the uninformed journalist and senators that hold onto myths that are not relevant in today's world.
When you say that the Big Three build vehicles nobody wants to buy, you must have overlooked that GM outsold Toyota by about 1.2 million vehicles in the U.S. and Ford outsold Honda by 850,000 and Nissan by 1.2 million in the U.S. GM was the world's No. 1 automaker beating Toyota by 3,000 units.
When you claim inferior quality comes from the Big Three, did you realize that Chevy makes the Malibu and Ford makes the Fusion that were both rated over the Camry and Accord by J.D. Power independent survey on initial quality? Did you bother to read the Consumer Report that rated Ford on par with good Japanese automakers.
Did you realize Big Three's gas guzzlers include the 33 mpg Malibu that beats the Accord. And for '09 Ford introduces the Hybrid Fusion whose 39 mpg is the best midsize, beating the Camry Hybrid. Ford's Focus beats the Corolla and Chevy's Cobalt beats the Civic.
When you ask how many times are we going to bail them out you must be referring to 1980. The only Big Three bailout was Chrysler, who paid back $1 billion, plus interest. GM and Ford have never received government aid.
When you criticize the Big Three for building so many pickups, surely you've noticed the attempts Toyota and Nissan have made spending billions to try to get a piece of that pie. Perhaps it bothers you that for 31 straight years Ford's F-Series has been the best selling vehicle. Ford and GM have dominated this market and when you see the new '09 F-150 you'll agree this won't change soon.
Did you realize that both GM and Ford offer more hybrid models than Nissan or Honda. Between 2005 and 2007, Ford alone has invested more than $22 billion in research and development of technologies such as Eco Boost, flex fuel, clean diesel, hybrids, plug in hybrids and hydrogen cars.
It's 2008 and the quality of the vehicles coming out of Detroit are once again the best in the world.
Perhaps Sen. Shelby isn't really that blind. Maybe he realizes the quality shift to American. Maybe it's the fact that his state of Alabama has given so much to land factories from Honda, Hyundai and Mercedes Benz that he is more concerned about their continued growth than he is about the people of our country. Sen. Shelby's disdain for "government subsidies" is very hypocritical. In the early '90s he was the driving force behind a $253 million incentive package to Mercedes. Plus, Alabama agreed to purchase 2,500 vehicles from Mercedes. While the bridge loan the Big Three is requesting will be paid back, Alabama's $180,000-plus per job was pure incentive. Sen. Shelby, not only are you out of touch, you are a self-serving hypocrite, who is prepared to ruin our nation because of lack of knowledge and lack of due diligence in making your opinions and decisions.
After 9/11, the Detroit Three and Harley Davidson gave $40 million-plus emergency vehicles to the recovery efforts. What was given to the 9/11 relief effort by the Asian and European Auto Manufactures? $0 Nada. Zip!
We live in a world of free trade, world economy and we have not been able to produce products as cost efficiently. While the governments of other auto producing nations subsidize their automakers, our government may be ready to force its demise. While our automakers have paid union wages, benefits and legacy debt, our Asian competitors employ cheap labor. We are at an extreme disadvantage in production cost. Although many UAW concessions begin in 2010, many lawmakers think it's not enough.
Some point the blame to corporate management. I would like to speak of Ford Motor Co. The company has streamlined by reducing our workforce by 51,000 since 2005, closing 17 plants and cutting expenses. Product and future product is excellent and the company is focused on one Ford. This is a company poised for success. Ford product quality and corporate management have improved light years since the nightmare of Jacques Nasser. Thank you Alan Mulally and the best auto company management team in the business.
The financial collapse caused by the secondary mortgage fiasco and the greed of Wall Street has led to a $700 billion bailout of the industry that created the problem. AIG spent nearly $1 million on three company excursions to lavish resorts and hunting destinations. Paulson is saying no to $250 billion foreclosure relief and the whole thing is a mess. So when the Big Three ask for 4 percent of that of the $700 billion, $25 billion to save the country's largest industry, there is obviously oppositions. But does it make sense to reward the culprits of the problem with $700 billion unconditionally, and ignore the victims?
As a Ford dealer, I feel our portion of the $25 billion will never be touched and is not necessary. Ford currently has $29 billion of liquidity. However, the effect of a bankruptcy by GM will hurt the suppliers we all do business with. A Chapter 11 bankruptcy by any manufacture would cost retirees their health care and retirements. Chances are GM would recover from Chapter 11 with a better business plan with much less expense. So who foots the bill if GM or all three go Chapter 11? All that extra health care, unemployment, loss of tax base and some forgiven debt goes back to the taxpayer, us. With no chance of repayment, this would be much worse than a loan with the intent of repayment.
So while it is debatable whether a loan or Chapter 11 is better for the Big Three, a $25 billion loan is definitely better for the taxpayers and the economy of our country.
So I'll end where I began on the quality of the products of Detroit Before you, Mr. or Ms. Journalist continue to misinform the American public and turn them against one of the great industries that helped build this nation, I must ask you one question. Before you, Mr. or Madam Congressman vote to end health care and retirement benefits for 1 million retirees, eliminate 2.5 million of our nation's jobs, lose the technology that will lead us in the future and create an economic disaster including hundreds of billions of tax dollars lost, I ask this question not in the rhetorical sense. I ask it in the sincere, literal way. Can you tell me, have you driven a Ford lately?
Enjoy...Yes I work for FORD. The ignorance the public has on the US automakers is pretty alarming..
OH ya..I am for getting rid or restructing rediculous Union contracts, but letting GM go under would do things to this ecomony that most of us could not imagine IMO.
You don't have to be an industry insider to know that Chapter 11 is reorganization without loss of jobs. It allows the company to reorganize debt, and renegotiate contracts. It has nothing to do with putting employees out of business unless that is what is necessary for the reorganization. So if the employee contracts are such a drag on the industry then they need to go anyway. $14B, $34B or any amount of money is not going to fix their problems. I don't care where you sit in the industry, no special knowledge is required. Quite frankly, this is all politics at it's worst. The Dem's are beholdin to the UAW. AND the UAW is the very thing that is going to kill those companies. Their contracts are so out of control, over the top, loaded it amazes me. They have no intention of negotiating to save their jobs and the industry. And that is coming from a strong union supporter.
You don't have to be an industry insider to know that Chapter 11 is reorganization without loss of jobs. It allows the company to reorganize debt, and renegotiate contracts. It has nothing to do with putting employees out of business unless that is what is necessary for the reorganization. So if the employee contracts are such a drag on the industry then they need to go anyway. $14B, $34B or any amount of money is not going to fix their problems. I don't care where you sit in the industry, no special knowledge is required. Quite frankly, this is all politics at it's worst. The Dem's are beholdin to the UAW. AND the UAW is the very thing that is going to kill those companies. Their contracts are so out of control, over the top, loaded it amazes me. They have no intention of negotiating to save their jobs and the industry. And that is coming from a strong union supporter.
Agreed! The union is unyielding and they are literally digging their own graves by not even acknowledging who huge a part of the problem they are. I was in favor of the bailout but after seeing the UAW president talk a couple times on TV, I now think they must go chapter 11 to lose that guy and his cronies.
You don't have to be an industry insider to know that Chapter 11 is reorganization without loss of jobs. It allows the company to reorganize debt, and renegotiate contracts. It has nothing to do with putting employees out of business unless that is what is necessary for the reorganization. So if the employee contracts are such a drag on the industry then they need to go anyway. $14B, $34B or any amount of money is not going to fix their problems. I don't care where you sit in the industry, no special knowledge is required. Quite frankly, this is all politics at it's worst. The Dem's are beholdin to the UAW. AND the UAW is the very thing that is going to kill those companies. Their contracts are so out of control, over the top, loaded it amazes me. They have no intention of negotiating to save their jobs and the industry. And that is coming from a strong union supporter.
Agreed! The union is unyielding and they are literally digging their own graves by not even acknowledging wow huge a part of the problem they are. I was in favor of the bailout... but after seeing the UAW president talk a couple times on TV, I now think the big 3 must go chapter 11 to lose that guy and his cronies.
turbofish38
Le Pétomane
- Joined
- Dec 3, 2002
To all you peeps who think Detroit should go bye-bye. Go F! yourself. Your just as clueless as the Dims in Washington. As far as Chapter 11 well here's my take. My former Boss filed Chapter 11 and I was pushed out to the curb along with 3,000 other tax paying citizens. What reorganization? Even if the doors opened tomorrow I wouldn't go back. Here's a copy and paste from what I consider to be one of the most informative experts in the industry and what he writes here makes pretty good sense to me anyway.Now tell me you aren't for bail out after reading it. This was from last week.
Washington. The battle drums are beating along the Potomac, and the message ringing unmistakably loud and clear in the ears of Senators and congressional representatives is this: The U.S automobile industry doesn’t begin and end with Detroit, southeast Michigan and the Midwest – a city, a state and a region that have apparently become expendable to the powers that be in Washington – but rather its tentacles spread out across the union in a powerful network of small and large businesses alike, from the local auto dealer franchise in small-town America, all the way to multi-billion dollar supplier corporations in the heart of Silicon Valley.
And now that this essential part of the U.S. manufacturing base is on the brink of oblivion, the real story is finally being told, and the untenable realities and ramifications of a collapse of the domestic automobile industry are being put in stark terms that even our leaders in Washington can understand.
In just this past week, the true value of the domestic automobile industry is coming to the fore, and people all across this country are starting to take notice.
The Los Angeles Times reported on Monday about the huge portion of sales tax revenue generated by vehicle sales in California and its affect on the taxes collected by city, county and state governments. Using just one example - when Heritage Lincoln Mercury (among the largest Lincoln Mercury dealers in California and part of the Tustin Auto Center) closed its doors in the city of Tustin in August – the Times reported that a crucial source of revenue for the city, which relies heavily on taxes from automobile sales to keep afloat, was devastated.
Of the city's $20-million annual budget, about $5 million comes from the local auto center, the city's director of finance, Ronald Nault, told the Times. And with sales of Lincoln and Mercury cars and trucks down by nearly a quarter nationwide through October compared with last year, the Heritage dealership was forced to fold. But it doesn’t stop there, because many of the other dealerships in the auto center, although still in business, are seeing severe sales declines, which means even fewer sales taxes collected.
"It has definitely affected us," Nault told the Times, adding that collections from the auto center were on pace to be off 20% for the year. And with industry-wide vehicle sales falling even more sharply in recent months, the revenue shortfall could be substantially greater, forcing the city to consider spending cuts, a salary freeze, reductions in travel and the possibility of layoffs for the first time in the city's history.
The Times continued by saying that “sales of new and used cars, as well as parts and service, are the single largest source of sales tax revenue for almost every state, county and local government, ahead of gasoline sales, restaurants and department stores. (Alaska, Delaware, New Hampshire, Oregon and Montana do not collect sales tax.) More motor vehicles are sold in California than in any other state; in the second quarter, nearly 15.5% of all sales taxes here, or $193 million, came from the automotive and transportation sector, compared with about $135 million from restaurants and hotels, according to Hdl Cos., which compiles sales-tax data for government agencies.”
But, the Times cautioned, California’s second-quarter automotive sales-tax receipts were down dramatically - more than $30 million short in the second quarter alone from a year earlier - contributing to the huge budget shortfall that has led Gov. Arnold Schwarzenegger to propose a sales tax hike and spending cuts.
"This is very bad for states," Donald Boyd, senior fellow at the Nelson A. Rockefeller Institute of Government told the Times, who went on to point out that sales taxes are the first or second most-important revenue source in almost every state.
And to think there are people still out there who suggest that the collapse of the domestic automobile business somehow “won’t affect them.”
Let’s go on to another part of the State of California – Silicon Valley - a relative hotbed of anti-Detroit rhetoric and home to major corporations involved in the manufacturing of semiconductors.
The Mercury News reported in last Sunday’s edition that “The financial crisis hammering Detroit's auto industry is sending shock waves to Silicon Valley, where a number of companies make the computer chips that have become increasingly vital components in cars and other vehicles. And if Ford Motor, Chrysler and General Motors go belly up, as some experts fear, the repercussions in the valley could intensify.”
"As soon as the automotive industry coughs, a lot of other companies get a cold," Thilo Koslowski, who tracks that business for research firm Gartner, told the News. "That includes companies in the semiconductor industry and that includes a lot in the Bay Area... It's a relatively big market for them in Silicon Valley."
For the record, the roster of South Bay companies that supply semiconductors for carmakers include Intel, Atmel, National Semiconductor, Spansion, Altera, Maxim Integrated Products, Xilinx, Linear Technology and Cypress Semiconductor, according to the News.
And one more report about the U.S. automobile industry’s role in the American economy. Crain’s Chicago Business, a sister publication to Automotive News, did a deep dive on what the collapse of a Detroit automaker would do to Chicago – “ from South Side manufacturers to northwest suburban dealerships to downtown TV studios” – and these are some of the staggering statistics they came up with...
“As General Motors, Ford Motor Co. and Chrysler LLC seek a multibillion-dollar lifeline from the federal government, many Illinois companies and workers are holding their breath. The state's stake in Detroit is huge: Illinois trails only Michigan, Ohio and Indiana in the number of auto-supplier jobs in the U.S. More than 80,000 jobs statewide are directly tied to the auto industry, government figures show, and one estimate puts the total number of workers with direct links to automakers at more than three times that number. The industry pumped more than $16 billion last year into the state economy through assembly plants, parts makers and car sales. If a Detroit automaker goes under, thousands of jobs will be lost, hundreds of businesses hurt and millions of dollars drained from the local economy.”
“I would hate to imagine the trickle-down effects of the job loss if these companies are allowed to just close up,” Greg Baise, president of the Illinois Manufacturers Association told Crain’s. “It would have a much broader impact than it would have had 30 years ago.”
The reason for that is that the U.S. automakers have delegated much of their supply chain over the years, including crucial parts-making operations. Crain’s reports that Illinois has about 200 auto-parts manufacturing operations today.
“Those plants employ tens of thousands of workers; three auto assembly plants employ another 7,000,” reported Crain’s. “Total employment attributed to the auto sector -- including related businesses such as those that supply or service parts makers -- is about 267,600, or roughly 4 percent of the state's total workforce, according to a 2007 study by the Center for Automotive Research, an industry think tank in Ann Arbor, Mich.”
Crain’s reported about one dealer’s fate. “Lattof Chevrolet of Arlington Heights closed its doors Oct. 10 after more than 70 years in business at the same Northwest Highway location. The company, which once had $30 million in annual sales, was in its third generation of family ownership. The closure put 65 employees out of work.”
“It's a shame to see this,” Arlington Heights Mayor Arlene Mulder told Crain’s. “Lattof Chevrolet for years was synonymous with the town of Arlington Heights. Everybody bought their cars there...It was a Lattof who helped us build a hospital in our town 50 years ago.”
As in Tustin, California’s case, the closure will hit Arlington Heights' budget too. Crain’s reported that “In the first six months of this year, the village of 77,000 had tax income from sales of cars and auto parts totaling $730,000, down from $838,000 in the first six months of 2007 and $915,000 in that period in 2006. The village has an annual operating budget of $60 million.”
The point of all of this?
The point is that the powers that be in Washington, D.C., are just waking up to the fact that the U.S. automobile business is so ingrained and intertwined with the nation’s economy on the local and state levels that a collapse of the Detroit automakers would be a cataclysmic event that would send this nation - already teetering from a deep recession - into a full-on depression. And to pretend otherwise is just pure folly at this juncture.
This week, our lawmakers in Washington will be getting a double-shot of reality about the Detroit they were so quick to scoff at and criticize a couple of weeks ago. The fact that they spewed hoary stereotypes about the Detroit that existed more than a decade ago was painful to listen to and even more painful to watch.
But this time they will be introduced to the real American automobile companies.
American automobile companies that have been doing the heavy lifting and fundamental restructuring needed since 2000.
American automobile companies that are now on the cutting edge of advanced technological developments in fuel efficiency, safety and environmental responsibility.
American automobile companies that are building an impressive array of class-leading vehicles in all segments, with more on the way with each passing quarter.
American automobile companies that have been part of the American industrial fabric for 100 years.
American automobile companies that powered this nation’s growth and propelled the development of middle-class, mainstream America.
American automobile companies that responded in the time of this country’s gravest need and created the Arsenal of Democracy that helped win World War II.
American automobile companies that are an inexorable part of every village, town, city and state in this great nation.
Washington will be forced to listen this week by the sheer momentum that comes from ordinary citizens speaking up all across America. People who understand what these American automobile companies mean to their local communities and to their livelihoods.
Ordinary people with extraordinary understanding that this whole issue concerning Detroit’s future isn’t a Republican thing, or a Democratic thing, but an American thing.
Thanks for listening.
The link to this rant can be found here. Rants - Autoextremist.com ~ the bare-knuckled, unvarnished, high octane truth... Bookmark the homepage so you can read a new rant every Weds.
Here's a copy and paste from what I consider to be one of the most informative experts in the industry and what he writes here makes pretty good sense to me anyway.Now tell me you aren't for bail out after reading it. This was from last week.Washington. The battle drums are beating along the Potomac, and the message ringing unmistakably loud and clear in the ears of Senators and congressional representatives is this: The U.S automobile industry doesn’t begin and end with Detroit, southeast Michigan and the Midwest – a city, a state and a region that have apparently become expendable to the powers that be in Washington – but rather its tentacles spread out across the union in a powerful network of small and large businesses alike, from the local auto dealer franchise in small-town America, all the way to multi-billion dollar supplier corporations in the heart of Silicon Valley.
And now that this essential part of the U.S. manufacturing base is on the brink of oblivion, the real story is finally being told, and the untenable realities and ramifications of a collapse of the domestic automobile industry are being put in stark terms that even our leaders in Washington can understand.
In just this past week, the true value of the domestic automobile industry is coming to the fore, and people all across this country are starting to take notice.
The Los Angeles Times reported on Monday about the huge portion of sales tax revenue generated by vehicle sales in California and its affect on the taxes collected by city, county and state governments. Using just one example - when Heritage Lincoln Mercury (among the largest Lincoln Mercury dealers in California and part of the Tustin Auto Center) closed its doors in the city of Tustin in August – the Times reported that a crucial source of revenue for the city, which relies heavily on taxes from automobile sales to keep afloat, was devastated.
Of the city's $20-million annual budget, about $5 million comes from the local auto center, the city's director of finance, Ronald Nault, told the Times. And with sales of Lincoln and Mercury cars and trucks down by nearly a quarter nationwide through October compared with last year, the Heritage dealership was forced to fold. But it doesn’t stop there, because many of the other dealerships in the auto center, although still in business, are seeing severe sales declines, which means even fewer sales taxes collected.
"It has definitely affected us," Nault told the Times, adding that collections from the auto center were on pace to be off 20% for the year. And with industry-wide vehicle sales falling even more sharply in recent months, the revenue shortfall could be substantially greater, forcing the city to consider spending cuts, a salary freeze, reductions in travel and the possibility of layoffs for the first time in the city's history.
The Times continued by saying that “sales of new and used cars, as well as parts and service, are the single largest source of sales tax revenue for almost every state, county and local government, ahead of gasoline sales, restaurants and department stores. (Alaska, Delaware, New Hampshire, Oregon and Montana do not collect sales tax.) More motor vehicles are sold in California than in any other state; in the second quarter, nearly 15.5% of all sales taxes here, or $193 million, came from the automotive and transportation sector, compared with about $135 million from restaurants and hotels, according to Hdl Cos., which compiles sales-tax data for government agencies.”
But, the Times cautioned, California’s second-quarter automotive sales-tax receipts were down dramatically - more than $30 million short in the second quarter alone from a year earlier - contributing to the huge budget shortfall that has led Gov. Arnold Schwarzenegger to propose a sales tax hike and spending cuts.
"This is very bad for states," Donald Boyd, senior fellow at the Nelson A. Rockefeller Institute of Government told the Times, who went on to point out that sales taxes are the first or second most-important revenue source in almost every state.
And to think there are people still out there who suggest that the collapse of the domestic automobile business somehow “won’t affect them.”
Let’s go on to another part of the State of California – Silicon Valley - a relative hotbed of anti-Detroit rhetoric and home to major corporations involved in the manufacturing of semiconductors.
The Mercury News reported in last Sunday’s edition that “The financial crisis hammering Detroit's auto industry is sending shock waves to Silicon Valley, where a number of companies make the computer chips that have become increasingly vital components in cars and other vehicles. And if Ford Motor, Chrysler and General Motors go belly up, as some experts fear, the repercussions in the valley could intensify.”
"As soon as the automotive industry coughs, a lot of other companies get a cold," Thilo Koslowski, who tracks that business for research firm Gartner, told the News. "That includes companies in the semiconductor industry and that includes a lot in the Bay Area... It's a relatively big market for them in Silicon Valley."
For the record, the roster of South Bay companies that supply semiconductors for carmakers include Intel, Atmel, National Semiconductor, Spansion, Altera, Maxim Integrated Products, Xilinx, Linear Technology and Cypress Semiconductor, according to the News.
And one more report about the U.S. automobile industry’s role in the American economy. Crain’s Chicago Business, a sister publication to Automotive News, did a deep dive on what the collapse of a Detroit automaker would do to Chicago – “ from South Side manufacturers to northwest suburban dealerships to downtown TV studios” – and these are some of the staggering statistics they came up with...
“As General Motors, Ford Motor Co. and Chrysler LLC seek a multibillion-dollar lifeline from the federal government, many Illinois companies and workers are holding their breath. The state's stake in Detroit is huge: Illinois trails only Michigan, Ohio and Indiana in the number of auto-supplier jobs in the U.S. More than 80,000 jobs statewide are directly tied to the auto industry, government figures show, and one estimate puts the total number of workers with direct links to automakers at more than three times that number. The industry pumped more than $16 billion last year into the state economy through assembly plants, parts makers and car sales. If a Detroit automaker goes under, thousands of jobs will be lost, hundreds of businesses hurt and millions of dollars drained from the local economy.”
“I would hate to imagine the trickle-down effects of the job loss if these companies are allowed to just close up,” Greg Baise, president of the Illinois Manufacturers Association told Crain’s. “It would have a much broader impact than it would have had 30 years ago.”
The reason for that is that the U.S. automakers have delegated much of their supply chain over the years, including crucial parts-making operations. Crain’s reports that Illinois has about 200 auto-parts manufacturing operations today.
“Those plants employ tens of thousands of workers; three auto assembly plants employ another 7,000,” reported Crain’s. “Total employment attributed to the auto sector -- including related businesses such as those that supply or service parts makers -- is about 267,600, or roughly 4 percent of the state's total workforce, according to a 2007 study by the Center for Automotive Research, an industry think tank in Ann Arbor, Mich.”
Crain’s reported about one dealer’s fate. “Lattof Chevrolet of Arlington Heights closed its doors Oct. 10 after more than 70 years in business at the same Northwest Highway location. The company, which once had $30 million in annual sales, was in its third generation of family ownership. The closure put 65 employees out of work.”
“It's a shame to see this,” Arlington Heights Mayor Arlene Mulder told Crain’s. “Lattof Chevrolet for years was synonymous with the town of Arlington Heights. Everybody bought their cars there...It was a Lattof who helped us build a hospital in our town 50 years ago.”
As in Tustin, California’s case, the closure will hit Arlington Heights' budget too. Crain’s reported that “In the first six months of this year, the village of 77,000 had tax income from sales of cars and auto parts totaling $730,000, down from $838,000 in the first six months of 2007 and $915,000 in that period in 2006. The village has an annual operating budget of $60 million.”
The point of all of this?
The point is that the powers that be in Washington, D.C., are just waking up to the fact that the U.S. automobile business is so ingrained and intertwined with the nation’s economy on the local and state levels that a collapse of the Detroit automakers would be a cataclysmic event that would send this nation - already teetering from a deep recession - into a full-on depression. And to pretend otherwise is just pure folly at this juncture.
This week, our lawmakers in Washington will be getting a double-shot of reality about the Detroit they were so quick to scoff at and criticize a couple of weeks ago. The fact that they spewed hoary stereotypes about the Detroit that existed more than a decade ago was painful to listen to and even more painful to watch.
But this time they will be introduced to the real American automobile companies.
American automobile companies that have been doing the heavy lifting and fundamental restructuring needed since 2000.
American automobile companies that are now on the cutting edge of advanced technological developments in fuel efficiency, safety and environmental responsibility.
American automobile companies that are building an impressive array of class-leading vehicles in all segments, with more on the way with each passing quarter.
American automobile companies that have been part of the American industrial fabric for 100 years.
American automobile companies that powered this nation’s growth and propelled the development of middle-class, mainstream America.
American automobile companies that responded in the time of this country’s gravest need and created the Arsenal of Democracy that helped win World War II.
American automobile companies that are an inexorable part of every village, town, city and state in this great nation.
Washington will be forced to listen this week by the sheer momentum that comes from ordinary citizens speaking up all across America. People who understand what these American automobile companies mean to their local communities and to their livelihoods.
Ordinary people with extraordinary understanding that this whole issue concerning Detroit’s future isn’t a Republican thing, or a Democratic thing, but an American thing.
Thanks for listening.
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whitehot84
Well-Known Member
- Joined
- Jun 6, 2001
What I want to know is "WHO IS GOING TO BUY THESE CARS"? The bailout is going to let the auto manufacturers go on with business as usual but there is no money to loan (or at least you have to have A+ credit) for buying these cars. Unemployment is at an all time high. New cars have eclipsed the $30,000 range ( thanks to the UAW) and the hybrids are out of the reach of most Americans.
If we, the tax payers, are going to subsidize the big three then why can't we require them to bring the manufacturing back to the states.? That would produce jobs and people who could buy new cars.
If we, the tax payers, are going to subsidize the big three then why can't we require them to bring the manufacturing back to the states.? That would produce jobs and people who could buy new cars.
We dont send people into coal mines with canaries anymore And osha doesnt let you get more than 36 inches off the ground without being strapped to a girder.The unions are no longer necessary.If you are in a position where you need the threat of a strike in order to make a good living Im having a hard time feeling sorry for you.
Nice way to open a conversation. Apparently you are highly invested in this topic.
Warp6
Mine since '92
- Joined
- May 25, 2001
It's your DEALER you need to speak with, not the manufacturer. Retail is the 300% markup. I'm a manufacturer.
I really don't think chapter 11 would work very well. The UAW is being too stubborn though. I work at a Chrysler/GMC truck dealer. We have people coming in and calling us constantly asking about the future of the big 3 and their warranties. We have customers that have ordered GMC pickups calling us asking if it will be built, and if so, is it going to have a lasting warranty if they go bankrupt. We also have potential new vehicle buyers waiting to see if the bailout passes before they buy anything. GM will have almost NO sales while in chapter 11. There will be massive layoffs. The UAW spokesman is going to send us all up $h!t creek without a paddle. The constant media attention is making customers more nervous. If the bailout passes, all three automakers will see a surge in sales the week after. Believe me, there are many, many potential new car buyers waiting to see if the bailout passes. If it fails, it will make more new car buyers apprehensive and sales will tank even more. GM is totally screwed without it. Chrysler will be next, but being owned by cerberus, they will liquidate and run. I guess if I have to become a ford guy, so be it. But it will be after I have used up every low mileage mopar I can scrounge.
Nice way to open a conversation. Apparently you are highly invested in this topic.
Ya, he lost me with that one. Not much interested in any points (even though they may have merit) when one starts of post with harsh rhetoric.
It's like... screw you guys, but read my long winded anyway.
