forced to liquidate – with devastating economic consequences for the entire
country.
- 3 million lost jobs at auto companies, suppliers, dealers, advertising, research, engineering and retail businesses.
- Thousands of small and medium sized businesses at risk.
- Hundreds of billions in lost tax revenues for schools, public safety, sanitation and other vital services.
- Health care and pensions in jeopardy for more than 1 million retirees.
- Billions in health care and pension costs passed on to taxpayers if Congress does not act and Chrysler, Ford or GM are unable to pay.
- Auto industry = 4% of U.S. GDP, ten percent of U.S. industrial production by value. One in ten U.S. jobs is linked to the auto industry.
- The current recession could become a depression if one or more major automakers is allowed to fail.
An industry in transformation: Automakers, the UAW, suppliers and other stakeholders have addressed the structural problems of the industry and a transformation is under way:
* Quality: Our vehicles are winning recommendations and awards from Consumer Reports and JD Power.
* Productivity: Our plants are more efficient than our non-union competitors, including nine of the top 10 plants in North America.
* Labor costs: UAW workers and retirees made major sacrifices in 2005 and 2007, saving the companies billions of dollars.
* Costs are competitive: Cost gap with European and Asian transplants has been largely or completely eliminated; one analyst has estimated that GM will soon have a cost advantage over Toyota.
* No pay cuts or concessions were demanded from non-executive employees at banks and investment firms who have already received tens of billions in federal aid.
* Energy efficiency: Domestic companies are shifting to a more fuel-efficient mix. GM has more vehicles achieving 30+ miles per gallon than any other automaker; GM and Ford are producing hybrids and Chrysler is the leading producer of neighborhood electric vehicles.
But: This transformation will never be completed if one or more companies are allowed to fail. The collapse of the supply chain could reduce or eliminate production at many other auto firms along with it -– including Toyota, Honda and Nissan, who rely on many of the same suppliers.
A legislative solution:
Congress is considering an amendment to the $700 billion financial rescue package, instructing the Treasury Department to use the existing funds to provide a $25 billion bridge loan to enable GM, Ford and Chrysler to continue operations and avoid liquidation.
* No new cost to taxpayers: Part of the existing Treasury Dept. rescue package; it will not involve any further expenditure of government funds.
* What it pays for: Investments in equipment, buildings and new products, as well as wages, salaries and benefits.
* Conditions on auto companies: Similar to those imposed on financial institutions: limits on executive compensation, and the government takes an equity stake to protect taxpayers.
Why the Auto Companies Need This Bridge Loan
* Lowest sales level in 25 years: Consumers are not buying cars; the economic downturn has made Americans much less secure about their jobs, their life savings and the value of their homes. Those who are in the market for new vehicles cannot find credit on reasonable turns.
* All companies affected: The downturn in sales has affected all automakers, domestic and foreign. Other countries, including Britain, France and Germany, are considering or have provided assistance packages to help their automakers.
* Current crisis not related to fuel prices: Current problem is not that consumers are demanding different, more fuel-efficient vehicles; the problem is that consumers are not buying vehicles at all.
* Chapter 11 not an option: GM, Ford and Chrysler will not simply reorganize under Chapter 11 and emerge as smaller, but more viable companies. Debtor financing is not available and 80 percent of consumers surveyed will not buy cars from a company in bankruptcy.
* Chapter 7 liquidation will take place if companies run out of funds. This means a cessation of all operations, with devastating consequences for the entire U.S. economy.
Every American has a stake in the auto industry. We urge every American to contact their U.S. Representatives and Senators. The Capitol Hill switchboard to reach members of Congress is: (877) 331-1223. Or send an e-mail.
Talking points (pdf 46 KB)