Auto industry still waiting
Published 9:32 pm Wednesday, December 17, 2008
By Kendra Majors
Detroit’s Big Three are still awaiting a possible financial intervention from the White House, after the U.S. Senate voted down a bill that would have provided $14 billion in bailout money.
Earlier last week, the House of Representatives voted in favor of the bailout, but it was met by strong Republican opposition.
The White House has stepped in, and is considering options to help ailing automotive companies.
One scenario White House officials are looking into is tapping into the $700 billion financial bailout package approved in October.
There is a push to make a decision quickly, as two of the three U.S. automakers are believed to be weeks or even days away from bankruptcy.
“An abrupt bankruptcy for autos could be devastating for the economy,” President George W. Bush told reporters Monday aboard Air Force One.
White House Spokeswoman Dana Perino said the president will not be rushed into making a hurried decision when it comes to the bailout.
“If we’re going to use taxpayer financing to assist the automakers, all stakeholders are going to have to come to the table and be willing to show that they are capable and willing to make really tough decisions about the way forward,” Perino said.
A main concern is millions of American jobs could be lost; many are directly and indirectly tied to the automotive industry.
With the nation already in a recession, and many without jobs, there is a strong urgency to help the automakers get back on their feet before the U.S. plunges into a deeper recession.
In November, national unemployment rate increased from 6.5 to 6.7 percent, according to the U.S. Department of Labor. The number of Americans unemployed equates to about 10.3 million people.
Vice President Dick Cheney echoed concerns in an interview with talk show host Rush Limbaugh saying, “if the automotive industry goes belly up now, there’s a deep concern that would be a major shock to they system.”
Locally, the main concern among dealerships is the negative publicity General Motors Corp., Chrysler and Ford received in the past weeks.
According to Jim Jackson, co-owner of Bill Jackson Chevrolet, if the bailout doesn’t pass the public perception of GM would become the biggest issue because consumers have the misconception that it would automatically void auto warranties if GM was forced into bankruptcy.
While Ford appears to be in much better shape than Chrysler or GM, they too are faced with negative publicity, which could affect sales greatly.
“No one wants to buy a car from a company that is bankrupt,” Ray O’Brien, general sales manager at Ken Cox Ford said.
Still, both Jackson and O’Brien agree that they have experienced a slight decrease in the number of new cars sold over the past months, but have not experienced as much of a loss as the majority of dealerships across the country
According to Jackson, his dealership was off 21 percent compared to GM’s 41 percent in November.
According to Robert Earl Stewart, professor of finance at Troy University, a bailout would provide an advantage to help keep car dealerships of GM, Ford and Chrysler operating for a longer period of time.
A bailout would continue to allow employees of the dealerships to keep their jobs for a period of time.
According to Stewart, the lifeline of the automotive industry will be the people.
Unless people buy cars, a bailout will not secure jobs or company stability, he said.