Michigan Awaits Outcome Of Automakers’ Visit To Capitol Hill Seeking Emergency Aid

Dec. 5, 2008
The much publicized road trip the Big Three automakers are making this week to Capitol Hill is big news throughout the nation, but its outcome really hits home in Michigan.

The much publicized road trip the Big Three automakers are making this week to Capitol Hill is big news throughout the nation, but its outcome really hits home in Michigan. The automakers are asking for a total of $34 billion in funding.

While one electrical distributor said he could argue both sides of the issue either way, he thinks the solution would be a bailout if the automakers could meet certain parameters. As the nation’s largest industrial automation specialist, McNaughton-McKay Electric Co., Madison Heights, Mich., probably has more direct exposure to the auto industry’s problems than any other electrical distributor in North America. Richard Dahlstrom, the company’s executive vice president of sales and marketing, said, “If I could draw a perfect scenario, my hope is that they would do the bailout,” he said. “But the U.S. automakers would absolutely make the tough decisions that they have to make, and that is going to be hard. The union contracts are antiquated; they’re just out-of-date and out-of-step with the times. And I think the management teams have been excessive in how they have treated their senior management and some of the decisions that have been made. If you look at GM and the key decisions they have made over the last couple of decades, it has been disastrous. Yet they continue to reward themselves with rich bonuses and the like. It doesn’t make any sense.”

Dahlstrom said the impact of the auto crisis on communities in southeastern Michigan is devastating. “Between the homes being foreclosed, the people who have lost jobs, people being forced to move away from what has been home for 20 years or however long, it just emotionally will drain you. This isn’t new. It isn’t something that just happened last week.”

He believes the automakers are “out of step” with consumer demand. “There has been a total lack of cars that people want to buy,” he said. “They have done OK with the trucks and the SUVs, but as that market shrinks, they are doing nothing to appeal to the consumer.”

In addition to getting funding, he believes three things are necessary to get the automakers back on track: They need to get their labor and manufacturing costs in line with the competition; get the management team to treat themselves in a way that is consistent with the performance of their companies; and they need to invest in new auto designs that will appeal to consumers and help them start regaining some of this market share erosion.

If the automakers do not get an infusion of cash, Dahlstrom said they do not have very long to survive. “GM is going to be quick to go. Chrysler doesn’t have too long to hold out. Ford is actually in the best shape.”

He sees bankruptcy as a “doomsday scenario” in a number of ways. He believes bankruptcy would fix the labor contracts because the auto makers could renegotiate whatever they wanted going forward from a labor standpoint. However, he said “the trickle-down effect” would be devastating to suppliers.

“It’s not just the U.S. automakers going into bankruptcy. You’re putting all their suppliers into bankruptcy as well. It’s a highly integrated supply chain, so you go from the automaker to the production tool company to all the parts suppliers, the people who make the drive chains and the axles and the interiors, and all those suppliers. Those are all our customers. It would be a disaster.”

Other sources contacted by Electrical Marketing for an article in the Nov. 21 issue said they were concerned about the impact on Michigan and possible ramifications on the general U.S. economy if the federal government didn’t provide financial assistance to automakers. Joe Schneider, president, Madison Electric Co., Warren, Mich., told EM that sentiment was strong in his local community that the federal government should help the ailing auto industry.