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Thursday, October 30, 2008
Political Leaders Seek Federal Funds To Offset GM-Chrysler Losses
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LANSING - Michigan political leaders and governors of other auto industry-heavy states are seeking federal involvement in a potential merger of General Motors and Chrysler, with many saying the job losses from that consolidation would not be as bad as a company disappearing entirely.
The Michigan Economic Development Corporation is also convening a meeting on Friday in Warren with local officials and other experts to assess the range of job losses the region could face and what responses public agencies could fashion.
Governor Jennifer Granholm, along with governors of five other states, said immediate action is required under the authority provided by the $700 billion bailout package to strengthen the economy. The letter the governors sent to Treasury Secretary Henry Paulson and Federal Reserve Chair Ben Bernanke urged them to "use your broad regulatory authority to ensure that your continued actions help promote liquidity within the U.S. auto industry."
They said the industry, suppliers, dealers, vendors and communities "face unimaginable challenges" at the current time, but did not explicitly refer to the discussions between the two automakers or other talks that involve Nissan-Renault. But Granholm did make the link between federal aid and the merger when talking to reporters.
The letter was signed by governors in Ohio, New York, Kentucky, South Dakota and Delaware.
An analysis released Wednesday by East Lansing's Anderson Economic Group said Michigan would bear the brunt of a merger, particularly in managerial, product design and engineering, and manufacturing areas.
At a morning press conference on stem cell research, Granholm acknowledged a merge would mean the loss of jobs, but "the alternative is worse." More importantly is the point made in the letter of the importance of a surviving auto industry to the U.S. economy.
"Can we support a smaller but healthier auto industry? We can," she said. The state will have to deal with the potential layoffs, but "ultimately we're going to be alright."
Brooks Patterson, executive at Oakland County which is home to the Chrysler headquarters, said what lies ahead will be remembered as "our Great Depression," though he, too, said with proper planning the impact can be minimized and the state and region can recover.
"We have to plan for the worst and hope for the best," he said.
While not explicitly supporting the merger, U.S. Sen. Carl Levin (D-Detroit) also warned that without federal financial help to facilitate a merger more jobs would be lost. He said funding for the aid could come from the $25 billion already pledged to the industry, though part of that was to help companies adapt to more fuel-efficient and alternative energy vehicles, and will come from the Department of Energy and U.S. Treasury.
He said he is for whatever option preserves the most jobs. "The whole purpose is to preserve jobs," the Associated Press quoted Mr. Levin saying at an event in Port Huron. "Without the loans we're going to lose more jobs than with the loans."
The merger is the topic of a meeting called for Friday by the MEDC in Warren, home to major GM research facilities, but the meeting will include officials from other cities with GM or Chrysler facilities, in all six counties and 12 cities.
The MEDC memo setting up the meeting referred to an "imminent" decision that would affect the communities.
An analysis by Grant-Thornton, which said Chrysler as it now exists will be gone soon, expects a merger would mean closure of half of the company's 14 manufacturing plants, costing 12,000 factory jobs and 12,000 administrative jobs though that includes three plants already slated for closure. Suppliers affected by the merger could lose another 50,000 jobs, the analysis said. It also noted the two companies account for half of the nation's auto dealerships, but sell only about one third of vehicles annually.
The benefits of a merger, the analysis said, is that the new manufacturer would be viewed as too big to fail, would displace Ford as the leader in sales of full-size pickups, would have more liquid assets courtesy of Chrysler, would have more products for a strong international presence, and would offer more cost-cutting opportunities.
Patterson, who said he held a similar meeting last week, said leaders are not jumping the gun even though it is not clear what or when a shake-up in the industry will occur. "We know there is a shoe that's going to drop," he said in an interview on WJR. "Let's get organized and get people into various responding groups to form a broad plan," he said. "I don't think this story is going to have a happy ending."
The impact will mean financial devastation in some areas, but Mr. Patterson said leaders will be better prepared to devise a response once they know the impact on communities, various categories of workers and businesses. "I'm confident we will come out of this," he said.
This story was provided by Gongwer News Service. To subscribe, click on Gongwer.Com
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Author: Staff Writer
Source:
Gongwer News Service
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