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Thursday, December 04, 2008 

Vol. 4 No. 11

The Engine of Democracy!

Go to TheEngineofDemocracy.com and Help Ensure that We Maintain an Auto Industry in the US…

Sometimes it becomes very questionable what motives drive Congress. It seems that the approval of a $700 billion bailout for banking and Wall Street passed quickly, without much of a problem, and with few recriminations blaming “management” for a financial meltdown clearly of their own making. Not only was there no long term examination of business plans etc., but, as released just a few days ago, over half of the money has already been disbursed, that is, $350 billion, without very much oversight, at least according to the General Accounting Office report. Yet approval for $25B in loans (not a bailout) for the American “Big Three” US automotive manufacturers is in serious question, on the pretext that the industry set the seeds of their own destruction, in poor management practices? This seems absurd for a whole host of reasons.

FIRST, as to the impact the domestic auto industry has on the nation’s economy, take a look at http://www.autojobsmatter.org. Even a cursory look paints a very clear picture. This from the Alliance of Automobile Manufacturers (BMW, Chrysler, Ford, GM, Jaguar/Land Rover, Mazda, Mercedes, Mitsubishi, Porsche, Toyota & Volkswagen):

  • America’s automobile industry is the engine that drives the US economy; no other single industry supports so much US manufacturing or generates so much retail business and employment
  • 1 out of every 10 US Jobs, or about 13 million, is auto-related
  • Almost 4% of the US Gross Domestic Product (GDP) is auto-related
  • Every auto plant job generates about 5 jobs among suppliers and the surrounding community (CAR); by comparison, a Wall Street job generates 2 additional jobs (Bloomberg)
  • Auto account for $690 billion of US retail sales, or about 20% of all US retail sales
  • More than 90% of new vehicles are financed with credit, requiring that consumers have the ability to borrow money
    (…I’ll will come back to this last one in a minute)

Now this from a Memorandum from the Center for Automotive Research:

  • The auto industry has one of the largest economic multipliers of any sector of the US economy & in many states, employment in automotive or automotive parts manufacturing ranks among the top three manufacturing industries
  • The rapid termination of the Detroit Three in the US would result in:
    Lost Jobs:
    · Nearly 3 million jobs lost in the US economy for 2009
    · 239,341 jobs lost at the Detroit Three
    · 973,969 indirect/supplier jobs lost
    · 1.7 million spin-off (expenditure induced) jobs lost
    Lost Income:
    · US personal income would be reduced by over $150.7 billion
    · A total of $398.2 billion in personal income would be lost over the course of three years
    Lost taxes (local, state and federal)
    · A loss to the government of $60.1 billion in 2009
    · $54.3 billion in 2010
    · $42.0 billion in 2011
    A total government tax loss of over $156.4 billion over three years

SECOND, I think its disingenuous (and ironic) that Congress’s response to not supporting the auto industry in government loans seems to be the idea that poor management, that is, not making enough energy efficient vehicles, precipitated the need for auto industry government loans, when its clear that the collapse of the credit market (see the highlighted bullet point above as it relates to retail vehicle sales, in addition to the manufacturers ability to borrow funds), and the resulting collapse of the economy (at least for all things financed), was the overwhelming culprit – yet the government saw fit to bail out (not loan) that industry to the tune of $700 billion with apparently few recriminations for what was irrefutably bad management practices, poor ethics, and lack of oversight.

Has anyone noticed, for instance that the price of fuel has nose-dived and yet the sale of new cars last month was still horrendous? Or that car companies that make the most fuel-efficient vehicles also having taking tremendous hits in sales totals (Honda, for instance). The financial crisis that the domestics find themselves in have very little to do, today, with their management decisions, and everything to do with the effects of Wall Street’s crisis.

And finally, I have to say that this popular uprising to auto companie’s use of corporate jets and other management benefits also seems to be the biggest of boondoggles. It seems to me that Congress didn’t really add anywhere near the emphasis to Wall Street’s almost “legendary” past and continued “executive perks?” Could it be that a lot of government and especially Treasury personnel come from Wall Street had some influence on this? I just saw a notice today that said that Merrill Lynch’s annual bonuses will be down 50% this year…and that’s sacrifice?!? I know some very good auto executives and auto vendors that haven’t seen a substantial bonus at all in years…and this, not using the government’s bailout money as the bonus pool.

If anyone reading this feels the way I do, and wants to do something about it or at least make your opinions heard, take a look at the

www.theengineofdemocracy.com, created by a coalition of organizations representing more than 6 million jobs related to the automotive industry.

As it says from their recent press release:

“Automotive employees, retirees, car owners, auto supplier employees, dealership employees, mayors, state legislators and interested citizens will be encouraged to go on the site and add their stories about America’s car industry and its impact on their lives. Visitors also will be encouraged to write their Congresswomen, Congressmen, Senators, Secretary Paulson, President Bush and President-Elect Obama – as well as legislators from other states – to encourage the U.S. Government to approve a bridge loan for America’s car companies.”

Although the auto industry has always been cyclical, this is the most critical downturn, and critical time, in the industry’s one hundred year history in the United States. To my way of thinking, it is the highest priority that we all rally now to ensure it and our future, and be heard by those who can make the difference in averting a catastrophe.

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