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Struggles with Auto Industry Bailout Dampen Los Angeles Auto Show

Published Nov 21st 2008, 5:00pm by Jody DeVere in Featured Articles

car and moneyWhen leaders of the Automotive Big Three left Washington empty handed Wednesday night, it became clear that the industry's immediate future may now lie with the Bush administration, which has staunchly opposed using the Treasury Department's $700 billion financial bailout program to aid Detroit. Top Executives from General Motors, Ford, and Chrysler begged Congress for multi-billion-dollar loans, but fell under fire for arriving in private - costly - jets. 

Thursday morning, Democrat leaders lead a televised news conference to "to discuss the details of a bipartisan agreement on a bill to support the auto industry."  Their last-ditch pitch aims to provide $25 billion in quick aid to an   industry that faces a catastrophic collapse if some kind of assistance is not found.

hand out the moneyAware that a cohesive plan to provide assistance to the automotive industry cannot be assembled before they leave for the upcoming holidays, Senators have pledged to reconvene Congress in the upcoming weeks to figure out how to provide emergency government aid  to weather the steep business downturn seen in recent weeks. The auto industry has been given until December 2 to devise a plan that will provide a path to "accountability and viability," though House Speaker Nancy Pelosi stressed that the plan must show they are transforming the industry in a way that it would become competitive, and that they must be clear about how the federal loan money will used.  "This is an important industry in our country and we intend to save it," Pelosi said. "Until they show us a plan we cannot show them the money."

Even this small amount of optimism has shown its effects: Shares of GM and Ford turned positive on news of the compromise talks on hopes that Washington would agree to help Detroit's Big Three. General Motors Corp. rose 9 cents, or 3.2 percent, to $2.88, while Ford Motor Co. rose 13 cents, or 10.3 percent, to $1.39. (Chrysler is privately held.)  Otherwise, according to Yahoo!finance, stocks fell for a second straight day today, plunging to the lowest levels in at least five years.

Los Angeles Auto ShowAs the media days of the Los Angeles Auto Show were underway, the subject was on the lips of nearly every journalist there. Even as automakers unveiled stunning new models, the automotive industy crisis cast a pall on the excitement. Conversations in which we participated touched on the importance of the industry to the country's economy, how the government can best provide assistance and how the automakers came to be in this situation. The poor example the executives set by traveling in such expensive fashion dropped the jaws of more than a few colleagues. And many of us wondered about the upcoming auto season as we prepare for industry cutbacks in new-car development and promotion. Everybody has something to say about it, even Consumer Reports has issued an official opinion.

Nissan's Chief Executive Carlos Ghosn opened the auto show with a media breakfast on Wednesday, saying the weakening global auto market now facing the industry will knock out some competitors and lead some automakers to consolidate. "We're still stuck in a situation where credit is not flowing normally, and the recession that began in the United States is not only deepening but spreading across the globe," Ghosn said. "It's fair to say that no one, no one, had predicted how the global economy would be so volatile in 2008."

pile of moneyNormally, auto show media days are packed with glitzy new car reveals as well as enthusiastic media reps and journalists, but automakers are cutting back in this year's Los Angeles and Detroit Auto Shows;  some aren't showing up at all. These shows are the premiere events to showcase their new vehicles and court new customers. "Clearly, we're affected," said Andy Fuzesi, general manager and co-owner of the Los Angeles Auto Show. "Everybody is clearly reassessing where they spend their money."

A tragic irony lies in the fact that gas is at the lowest price it has been in years and people have no money to spend on cars. And it's not just domestic manufacturers being affected: The New York Times has revealed that the Port of Los Angeles has become a parking lot for import cars that have nowhere to go.
"Unwelcome by dealers and buyers, thousands of cars worth tens of millions of dollars are being warehoused on increasingly crowded port property... While shipments for some items have slowed, the cars have kept coming in at their regular pace partly -- because the auto factories can take months to adjust to changes in demand. Toyota is wrapping up a deal to use six acres to park cars at the port, and is seeking more space."

If you consider every tiny component in a car -- wires, fabric, carpet, buttons, straps, fasteners, etc -- then it becomes more clear how important it is to keep these bigger businesses viable. Some of these small-parts manufacturers may even provide these specialized items internationally, which means that if one of these Big Three companies goes down, it may take these suppliers with them and potentially affect other car manufacturers around the world.

If auto show season puts you in the market for a new car, dealers are offering remarkable incentives to assist your purchase.  While you're walking the shows and wishing for your next new car, also keep in mind that it's now more important than ever to buy domestic.

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