Automobile industry meets with Senate about tanking sales

$25 billion to Detroit-based companies might not gain ground

Alison Harman

Features Editor

Three chief automotive industry executives testified before the Senate Banking Committee Tuesday in an attempt to garner support for federal aid that, they argue, could prop up a collapsing national industry. Democratic leaders in the Senate, however, said the $25 billion stimulus package — which would come from the $700 billion allotted to Wall Street’s bailout — did not gain enough ground among senators, according to a New York Times report.

Rick Wagoner of General Motors, Alan Mulally of Ford and Robert Nardelli of Chrysler each took their time before the committee to emphasize the American-made companies’ influence on the both country’s auto market and citizen employment.

“We directly employ approximately 96,000 people in the United States,” Wagoner said. “We have more than 2,000 suppliers located in 46 states. We purchased $36 million in goods and services from them last year.”

The Detroit-based companies have suffered substantial loss this year — a loss that only added fuel to an industry that has grown increasingly weak for decades — according to economist and professor of economics Michael Walden.

“The American companies — Chrysler, Ford, General Motors are losing money, and they’re in danger of having to cease operations. They have had problems competing for several decades, but their problems have become greater during the economic recession.”

The recession, which Walden said was triggered by a failing housing market, has created an environment in which people are less likely to buy cars. Unemployment rates for October rose .4 percent to 6.5%, and although average hourly wages rose by $.04, the increase goes mainly toward paying for the cost of inflation.

And this type of economy doesn’t foster expenditures that run receipts of thousands of dollars, Walden said.

“People reduce their purchases of automobiles during recessions,” he said, adding that a credit crunch has hindered even those who are willing to buy cars from doing so. “People are having more trouble getting the financing to buy anything.”

But consumers aren’t the only ones who are affected by the recession.

If GM, Ford or Chrysler have to halt or slow production due to their record-low sales, almost 100,000 people would be laid off from their industry jobs, and a million regular stockholders would lose their investments.

A second automobile industry that is located in the South — one that Walden said is “primarily based on foreign automobile producers like Toyota, Honda and Mercedes who have factories in the South” — could profit from the Detroit-based industry’s downfall.

“If the Detroit companies were to become smaller, reduce production and lay off workers, that would not affect the South automobile industries,” Walden said. “Over time, they might actually gain ground because they wouldn’t have as much competition from Detroit.”