Randy's Ramblings: Playing politics with the auto industry is playing with fireOn a recent visit to Dave Holt Ford to take a photo of the dealership’s new salesman, Tony Gruber, it occurred to me to ask the owner what he thought about the hubbub in Washington, D.C., over efforts to rescue U.S. automakers.
On a recent visit to Dave Holt Ford to take a photo of the dealership’s new salesman, Tony Gruber, it occurred to me to ask the owner what he thought about the hubbub in Washington, D.C., over efforts to rescue U.S. automakers.
“They’re playing with fire,” was Holt’s assessment of the politicians who torpedoed a deal by congressional Democrats and the Bush White House to extend $14 billion in emergency loans to the automakers.
Holt quoted the phrase oft heard in recent weeks that one in 10 American jobs is connected to the automobile industry.
If it’s true of the nation, it is certainly true of Hudson.
Besides the Ford dealership, we’ve got Hudson Luther Chevrolet Pontiac GMC and Hudson Chrysler. That’s the Big Three right here in River City.
Add to those the 404,000-square-foot General Motors parts distribution facility built in 2004 and the Johnson Controls plant that has been turning out seats for Ford Ranger trucks since January 1997. Both are located in Hudson’s St. Croix Business Park.
Independent repair shops, body shops, parts stores and vehicle accessory businesses round out the Hudson enterprises linked to car manufacturing.
Granted, the last group would stick around even if the American automakers are scrapped. But a few hundred Hudson workers will lose good-paying jobs if the dealerships, the parts distribution plant and Johnson Controls are forced to close their doors.
The Center for Automotive Research says that nearly 3 million American jobs will be lost in the first year if the Big Three collapse.
The job losses would reduce federal income tax payments by $24.7 billion and Social Security tax payments by $21.1 billion, according to the nonprofit organization devoted to auto industry research.
According to Bloomberg.com, it could cost the government $100 billion to $200 billion in assistance to laid-off workers if GM alone fails. That makes the $14 billion nixed by Senate Republicans from Japanese-car-making, southern states seem like a bargain.
And it’s a pittance compared to the $700 billion that lawmakers agreed to pony up for the financial industry — the perpetrators of the economic crisis we find ourselves in.
Holt said Ford is in better financial shape than either GM or Chrysler, which is why Ford isn’t asking for any of the emergency financing — for now at least.
He said Ford has made better business decisions than the other two companies. He expects Ford to survive the current difficulties and be a better company for it.
Still, Holt sympathizes with his American competitors.
The main reason for the auto industry’s current woes, he said, is the recession brought on by the subprime mortgage fiasco.
Indeed, the foreign automakers’ November sales numbers weren’t that much better than the American’s.
Nissan’s sales were off by 42 percent compared to November of 2007, Toyota’s, 34 percent, and Honda’s, 32 percent.
Ford fared better than each of those companies with a 31 percent decline.
Interestingly, Nissan has a plant in Tennessee, home to Bob Corker, the freshman senator who wanted United Auto Workers to unilaterally agree to further wage and benefit concessions.
Corker, by the way, got rich in the industry that produced our financial meltdown. He lives in a 30-room, 10,000-square-foot house that he paid $2.4 million for in 2000.
The southern senators’ opposition to aiding the American auto industry drips with hypocrisy.
Sen. Richard Shelby, ranking member of the Senate Finance Committee, has been the most visible opponent of any federal government assistance for the automakers. Yet his home state of Alabama provided a $253 million incentive package to get Mercedes Benz to build a plant there.
The state also gave the foreign automaker land worth between $250 and $300 million, improved the building site, upgraded utilities, trained the workers and bought 2,500 Mercedes cars.
(Who would have guessed that the late Janis Joplin and Sen. Shelby had so much in common: “Oh, won’t you buy me a Mercedes Benz… .”)
Alabama’s subsidy to Mercedes Benz amounted to somewhere between $153,000 and $220,000 per job created, according to Peter Karmanos Jr., the CEO of Compuware Corp., who wrote a letter to Shelby complaining about it.
The state also dished up a heaping plate of incentives to get Honda and Hyundai to locate there.
I’m not arguing that autoworker wages and benefits didn’t get out of hand over the years.
I agree with Holt, who said that the generous compensation — as well as legacy pensions and health benefits, and paying “job bank” workers with nothing to do — are part of the reason for the industry’s problems.
But those issues have been addressed in recent union contracts. New assembly line hires now make a modest $14 per hour. And the UAW has said it is open to further concessions if the other players are willing to sacrifice, too.
Furthermore, the American automakers have made up the quality gap that existed in the late 1990s. They’re producing sleek and increasingly fuel-efficient sedans and crossovers that compare well with the best the Japanese, Koreans, Germans and Swedes have to offer.
My next car will be a Ford or Chevy if the companies survive the boneheaded politics blowing out of the south.
My daughter just bought a Ford Focus and loves it. I like the Focus, too. It’s a sharp little car and a Consumer Reports recommended buy.
The Ford Fusion, Mercury Milan or Chevy Malibu or Impala would suit me fine. My classy wife likes the Lincoln Zephyr.
The kid in me wants a Ford Mustang convertible or the 2010 Chevy Camaro scheduled to be available next spring.