Locals weigh in on auto crisis

Published 10:24 am Monday, December 15, 2008

It will take more than money to bail out the Big Three automakers, according to one Michigan State University economic expert.

Although a local auto dealer didn’t use “bail out,” he offered statistics to suggest why a bail out would be prudent for the nation’s economic recovery.

And another auto dealer scolded Congress and the media for a “lack of knowledge” about the situation.

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When the week ended, uncertainties over rescuing automakers lingered. The U.S. House voted to extend a financial lifeline, while the U.S. Senate rejected a bailout proposal.

The House approved a $14 billion rescue plan last Wednesday night to help struggling U.S. automakers, but the Senate rejected the plan a day later.

The bailout measure passed the House on a 237-170 vote as supporters warned that federal aid was needed to prevent the collapse of one or more of the Big Three companies. That collapse and the steep job losses could plunge the country deeper into recession.

The questions seem to be: “How big are the Big Three?” and “Are they big enough to convince Congress they need help and need it now?”

With the economic future of the country at stake, any decision Congress makes, regarding the auto industry, will be historic. Solutions to fixing the auto industry are as varied as public sentiment.

For instance: Whomever President Bush might tap as the “auto czar,” an MSU expert with Austin ties offers insights into what may be on that individual’s hubcap.

“Big-time restructuring at the industry level,” said Robert Wiseman, MSU professor of management. “Individual auto companies have now fixed many of their internal problems, which had to be done.

“Historically, some companies which have come to a head with restructuring have also had to fight to regain their dominance in the industry,” the MSU professor observed.

Wiseman is an Austin native, who graduated Austin High School in 1973.

Selecting an “auto czar” to watch over the possible bailout will be important for everyone involved, according to the professor.

“Whoever is selected will spend several months figuring out where the companies, as well as the industry, stand,” Wiseman said. “The person will have to look at what to keep, junk, sell or shut down. We may be looking at up to two years before we’ll have a better understanding of where we are in the marketplace. This person will have to have long-term vision and the ability to help the industry consolidate and remain competitive globally.

Putting ‘big’ in Big Three

Closer to home, Austin auto dealer Tom Sherman struck a positive chord from his perspective.

“The car business is alive and well in Austin,” Sherman said. “As with that famous journalist and author, Mark Twain, the reports of our demise seem premature at best.”

Sherman owns the Usem’s Inc. GM dealership; a bastion of the Austin business scene for more than seven decades.

Sherman crunched numbers to underline how important the automakers, suppliers and dealerships are to the nation’s economy and how powerful foreign automakers are today.

And, the numbers he came up with underscored how all automakers have seen the pitfalls of a world economic crisis.

According to Sherman’s statistics, GM’s U.S. market share dropped from 23.4 percent in December 2007 to 19.9 percent this October.

Meanwhile, Ford’s share remained steady: 15.6 to 15.3 percent and Chrysler’s declined slightly, 12.6 to 11.3 percent.

The overall U.S. market share enjoyed by the Big Three declined from 51.6 to 46.5 percent in the first 10-months of 2008.

In the same 10-month period, Toyota U.S. market share improved from 15.9 to 18.1 percent and Honda’s increased slightly from 9.4 to 10.3 percent.

While employee figures weren’t available from Ford and Chrysler, Sherman’s had GM’s.

GM had 96,000 direct employees in the U.S. in September. “Indirect” employees (suppliers, dealerships, et cetera) totaled 340.000.

Meanwhile, Ford employed 80,000 workers and Chrysler employed 66,000.

The Big Three earned the “big” by employing 242,000 direct workers, according to Sherman.

The survey showed Toyota employed 36,632 direct workers and Honda 25,000 as of September.

Another economic indicator of the impact of auto workers on the nation’s economy: The average hourly wages and benefits of a U.S. auto company worker is $73.21 among all three automakers.

The average hourly wages and benefits for workers at Toyota and Honda: $48.

Many auto dealers are “gun shy” about talking to reporters about the proposed bailout presumably fearing a distortion of the facts as they see the situation.

Nathan Toland, owner of Holiday Cars, the Ford, Dodge, Chrysler, Jeep dealership in Austin, declined to speak on the record.

The city’s GM dealer, Sherman, chose to allow statistics to speak for him.

Other dealers far away from Austin are outspoken.

Jim Jackson, owner of Fordland in Elkins, West Virginia, went so far as to scold the media in a letter to the editor that Sherman refers to frequently.

“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,” Jackson wrote.

“The same lack of knowledge is shared with many journalists whom are irresponsible when influencing the opinion of millions,” he also scolded.

Then, the Ford dealer concluded with a lengthy question, “Before you, Mr. or Madam Congressman vote to end health care and retirement benefits for one million retirees, eliminate 2.5 million of our nation’s jobs, lose the technology that will led 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: Have you driven a Ford lately?” Last week, Congress rejected a Big Three bailout package and so did the U.S. Senate. The bail out debate rages, but Sherman and his counterpart in West Virginia have no apparent doubts: The Big Three in Detroit can fill a big hole in the nation’s economy.

And that leaves the nagging question: Ignoring that will create an even bigger hole.