Congress is working to keep U.S. auto suppliers in business.
U.S. Rep. Mark Souder, R-Ind., delivered that message to a handful of local suppliers Tuesday (May 12) at the Goshen (Ind.) Chamber of Commerce, but pointed out that it’s not going to be easy, according to The Goshen News.
“The complexity on how to address this is huge,” Souder said following the two-hour closed-door meeting.
Souder, whose district covers northeast Indiana, has been meeting with leaders of General Motors Corp. and Chrysler LLC to understand their challenges and discuss finances, unions and the supply chain, among other topics. Part of what initiated the talks was a recent announcement from GM that any dealership that sold fewer than 30 vehicles or failed to hit at least 50% of its quota would be terminated. Dealers would then have a deadline of Dec. 31, 2010, to liquidate remaining items.
The announcement is another leg kicked out from underneath the supply chain, much of which operates in northern Indiana. Souder worries just how many more hits the area can take.
“If we lose our big auto companies on top of the (most likely partial) recovery in RVs, we’re looking at a catastrophic, probably irrecoverable impact on our area similar to Studebaker in South Bend,” Souder said. “On top of what’s happening everywhere else in housing and RVs, we’ll never replace the jobs we’re losing.”
Despite the negative atmosphere, Souder said he believes 50% to 60% of GM’s dealers will survive, and that GM, after going through bankruptcy proceedings, will also survive. He also believes Ford will survive, but doesn’t know what will happen with Chrysler, which has filed bankruptcy and signed a partial ownership deal with Italian auto manufacturer Fiat SpA, which is being handled to some extent by the Italian government.
At the same time, he noted that American auto companies are competing with foreign companies that are being financially supported by their governments in ways the United States hasn’t yet seen.
“It’s not like this is going to bounce back when you have every government around the world funding your competition,” Souder said. “Those countries view them as integral and a much bigger part of their country than even autos are in our country, so they are going to do everything they can to keep them from folding.”
He said, for example, although some American auto parts suppliers will sell to Japanese companies, Japan restricts the amount of American parts used in their vehicles, even if they are being built in the United States. Again, he said increasing our competitiveness will not be simple.
“You can’t just whip up barriers or China will pull out of our market and collapse our economy,” Souder said.
One way Congress is working to prop up the American auto supply chain is by trying to figure out how to use Troubled Asset Relief Program (TARP) funds to make a difference to keep the companies from shutting down.
According to chamber president David Daugherty, reaction to Souder’s statements from local suppliers was relatively positive.
“Most of them said, ‘we’re geared for it, we’re OK, we’re going to make it,’ so that was the reassuring part,” Daugherty said.
He said that, to an extent, nothing will change with the basic business of running the companies, and placement will be key.
“It’s going to be different when General Motors comes out of whatever they go through,” Daugherty said. “It’s one where you’re going to have to make sure you’re there, you’re competing, you’ve got the product and that your suppliers are getting you what you need to stay in the game.”