Even amid the festive atmosphere of a downtown ice skating rink, it’s impossible to escape the worries the Motor City faces as the US auto industry waits to see whether it will get a lifeline from the federal government.
“People are scared to death. You can’t have a conversation without it coming up,” said Jeff Doyle, who was watching his children skate at Campus Martius Park, just a few blocks from General Motors Corp’s (GM) headquarters and its giant blue GM logos that loom over the city. “Everything here is related to the auto industry.”
Nearly everyone in the Detroit area has family or knows someone involved in the industry, and the uncertainty of its future, along with the recession, is painting a definite pall over the holiday season.
Doyle, the only person in his immediate and extended family working outside of the auto industry, said on Saturday that there was an “underlying tension” among his relatives and friends with the fate of GM and Chrysler up in the air.
Everyone was trying to remain upbeat during the holidays, he said, but family gatherings “certainly won’t be as extravagant.”
The fates of thousands of auto suppliers and dealers across the country are also in limbo as they wait to see what will happen to GM, Ford Motor Co and Chrysler LLC.
Hopes for a bailout have been seesawing all week. The US House of Representatives on Wednesday approved a plan endorsed by the White House to provide US$14 billion in loans, only for it to run into opposition from Republican senators on Thursday night.
Then, the White House said on Friday that it would consider using part of the US$700 billion financial industry bailout to help the car companies. There were few details on Saturday about the size or length of the help while Bush administration officials talked with the automakers.
GM and Chrysler have warned they are running out of cash and face bankruptcy without some form of assistance by year’s end. Ford is in better shape financially but wants access to a line of credit in case US auto sales keep declining.
Dave Green, president of United Auto Workers Local 1714, which represents about 1,100 workers at a GM fabricating plant in Ohio, said the bailout’s uncertainty makes it hard to feel good about the future, even though an adjacent assembly plant is scheduled to begin production in 2010 of the Chevrolet Cruze, a fuel-efficient small car that aims to get around 17km per liter.
“If GM runs out of money, obviously the fear is that something will happen to that product,” Green said. “That car is the future of our workers. It’s the future of our community.”
Also at risk are the thousands of jobs tied to the auto suppliers, which produce everything from axles to electrical components for not just the US-based automakers but their foreign rivals as well.
If one of the Detroit automakers was to file for bankruptcy protection, many suppliers could follow, setting off a chain reaction that would disrupt the production of every other company that builds cars in the US, said Dave Andrea, vice president of industry analysis and economics for the Original Equipment Suppliers Association.
Andrea said it may be impossible to predict just how far-reaching the ripple effect of an automaker bankruptcy could be.
“I think the greatest uncertainty is that we’ve never experienced a Chapter 11 as complex and with this kind of a supply chain as any of the vehicle manufacturers,” he said.