Loading ...
By BRIAN A. HOWEY
CARMEL - The lease on my Ford F-150 is just about up, so I’ve been doing my research and after a summer of $4.19 a gallon gas, I decided I wanted to buy a Ford Escape Hybrid. It gets 36 mpg city, 31 highway. It’s 
American made. And I went to the local Ford dealer for a test drive. The salesman kept telling me that I better buy that one now because it was the only one on the lot and there were only “11 in the entire state of Indiana.”
Eleven in the entire state?
If you wonder why the American auto industry is in precarious shape, ponder that. Or think back to the General Motors EV1 of the 1990s that established a loyal consumer base in California, only to have the auto maker pull them all off the market and destroy them. Until recently, GM was pushing the Mishawaka-made Hummer product line.
As GM goes, so goes the nation. And so goes the Hoosier state. Twenty percent of the Indiana workforce is in automotive related businesses. It goes well beyond those plants making windshields and transmissions. In the old days, GM had vertical integration, but now it essentially has a design and manufacturing core, having out-sourced not only the supply chain, but things like informatIon technology. And many of these Indiana companies don’t make things just for GM, but for Toyota, Honda, Chrysler, etc.
GM stock was trading at $2.92 just after its 100th birthday this past week, the lowest point in 65 years. Next month GM’s cash reserves will fall below the minimum $10 billion it needs to run its global operations.
“The dynamics here are multiple,” said Patrick Kiely, president of the Indiana Manufacturers Association. Back in 1982, he was Indiana House Ways & Means chairman for three weeks when Gov. Robert Orr called a special session that dealt with that severe recession and positioned Indiana to become part of the Chrysler bailout.
I asked Kiely what would happen if GM files for bankruptcy and, after that, collapses into oblivion. He couldn’t tell me exactly how many companies or workers toil for or supply GM. “What we do know is that 20 percent is transportation related, second only to Michigan,” he said. “It’s huge for us. An automotive calamity would certainly impact us.”
In his victory speech on Election Night, Gov. Mitch Daniels understated that Indiana was in for a “rough patch.” At his first press conference three days later, President-elect Barack Obama pushed for a federal bailout of the Big 3, explaining, “The news coming out of the auto industry this week reminds us of the hardship it faces, hardship that goes far beyond individual auto companies to the countless suppliers, small businesses and communities throughout our nation who depend on a vibrant American auto industry. The auto industry is the backbone of American manufacturing and a critical part of our attempt to reduce our dependence on foreign oil.”
Obama called on Congress to “accelerate the retooling assistance that Congress has already enacted” and to create “additional policy options to help the auto industry adjust, weather the financial crisis, and succeed in producing fuel-efficient cars here in the United States of America.”
Or as the chatter from Elkhart on the internet M*A*S*H went this week, “They can’t be bailed out. They suffer the three curses of business: Terrible management, a work force that has them tied in knots, and they build a bad product that lacks vision and/or practicality. The Big Three are screwed, blued and tattooed by the monster they have allowed themselves to evolve into. They are a bottomless pit for taxpayer money, similar to AIG. Let them fail and restructure with decent management and a new, grateful, non-union work-force at a respectable living wage.” Industry analysts agree, saying that many of the bankrupt plants could be revived under new firms, new management and revolutionized product lines.
Kiely saw the storm clouds gathering 18 months ago on the speculation that whiplashed Wall Street this summer. “What we’re seeing is an economic cycle that normally would play in over 20 years coming in three months,” he said. Gas has gone from $147 a barrel last summer ($3 short of Osama bin Laden’s goal) to $57 a barrel this past week.
Back in 1982, with unemployment in Anderson at 26 percent, Kiely participated in the Chrysler bailout designed in part by U.S. Sen. Dick Lugar. The state was repaid with 12 percent interest within five years and subsequent Chrysler innovation brought us the mini-van. It employs around 5,000 Hoosiers in Kokomo.
The danger in allowing a collapse of the Big 3 is anywhere from 2 to 5 million jobs lost nationally and a shudder through the economy. Retailer Circuit City is bankrupt. Best Buy saw its stock plunge 13 percent. “Since mid-September, rapid, seismic changes in consumer behavior have created the most difficult climate we’ve ever seen,” CEO Brad Anderson said. “Best Buy simply can’t adjust fast enough to maintain our earnings momentum for this year.”
Kiely asks, “Is Best Buy the beginning of a trend or a collapse?” He noted a recent radio interview with an exotic dancer named “Danica” in Indianapolis who said she was working twice the hours for the same amount of tips last month. But once gas dropped to $1.80 a gallon, “the guys are back.”
On Tuesday morning, I drove my F-150 downtown - burning through a couple of gallons of gas - to do a Chamber of Commerce panel with State Sen. Jim Merritt and State Rep. Greg Porter. They talked about government reform, health care, education funding and a murky biennial budget.
I reminded them that they didn’t start calling the Great Depression by name on Oct. 30, 1929. That took awhile to sink in. The world we’re seeing now as opposed to what we’ll see next April or May is unfathomable.
Tags: Barack Obama, Brian Howey, Dick Lugar, Greg Porter, Jim Merritt, Mitch Daniels, Patrick Kiely
Related posts
This entry was written by and posted on November 13, 2008 at 3:25 pm and filed under HPI Weekly. Bookmark the permalink. Follow any comments here with the RSS feed for this post.
Post a comment(Latest is displayed first) or leave a trackback: Trackback URL.