Even amid the festive atmosphere of a downtown ice skating rink, it’s impossible to escape the worries the Motor City faces as the U.S. 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’ 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 a family member 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 Saturday that there’s an “underlying tension” among his relatives and friends with the fate of GM and Chrysler up in the air. Everyone’s 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 General Motors Corp., Ford Motor Co. and Chrysler LLC.
Hopes for government help have been seesawing all week. The House on Wednesday approved a plan endorsed by the White House to provide $14 billion in loans, only for it to run into opposition from Republican senators Thursday night.
Then, the White House said Friday that it would consider using part of the $700 billion financial industry bailout to help the car companies. There were few details 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 U.S. 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 Lordstown, Ohio, said the bailout’s uncertainty makes it hard to feel good 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 40 miles per gallon.
“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 U.S.-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 U.S., 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.
Ann Wilson, senior vice president of government affairs for the Motor & Equipment Manufacturers Association, said the White House needs to provide the automakers with enough financial help to get them through the end of the year.
“Right now, what we need is some stability in the system,” Wilson said.
Auto dealers are hoping that their industry will stabilize soon and reverse this year’s steep sales decline. Worries about unemployment and difficulties getting loans have scared consumers away from dealer lots this year, sending vehicle sales to their lowest levels in 26 years.
J.R. Dugan, co-owner of Dugan Chevrolet in Avon, Ind., said he’s confident that the automakers will eventually get the money they need, whether it comes from Congress or the Bush administration.
“We’re going to have to kick and scream a bit more, but the Big Three will get what they need, no doubt,” Dugan said. “I mean it’s not too concerning, but it’s pretty frustrating to see what has to be portrayed to the public, to the consumers.”
Dugan said his sales started to improved at the beginning of December when it looked like a bailout would make its way through Congress. He said he remains cautiously optimistic that trend will continue through the month.
Back in the Detroit area, one of the worst hit by the recession, even those not directly associated with the auto industry are cutting back.
“This situation doesn’t help at all. It’s somewhat gloomy,” said Cedric Franklin of Detroit, at a going out-of-business Circuit City store in Dearborn, Mich., near Ford’s headquarters. “It doesn’t feel much like Christmas at all.”
A turn for the worse with one of the Detroit Three would exacerbate the economic situation here, as local residents fear being hit by the dominoes that would begin to fall if an automaker goes broke.
“I think this is affecting everyone’s shopping habits, everyone’s a little apprehensive,” Jerry Johnson said as he left the electronics store. The Southfield, Mich., resident said his extended family committed to spending less this season, with each buying a gift for one relative, instead of gifts for all 25.
“It won’t make Christmas sadder,” Johnson said. “I think in a weird sort of way we might enjoy it more since we don’t have the pressure of paying for all those gifts.”