Fallout: The Financial Crisis

U.S. auto industry isn’t just Big Three

Marketplace Staff Nov 18, 2008
Fallout: The Financial Crisis

U.S. auto industry isn’t just Big Three

Marketplace Staff Nov 18, 2008


Kai Ryssdal:
All right, on to bailout fallout Part 2. Today was a long day of hearings on Capitol Hill. The afternoon session convened in front of the Senate Banking Committee.
Alan Mulally from Ford, Bob Nardelli from Chrysler, Rick Wagoner from GM and Ron Gettlefinger, the head of the United Auto Workers were at the witness table.
All four were trying to make the case that the auto industry, at least the Detroit part of it, needs help and it needs it now.
Micheline Maynard covers Detroit for the New York Times. Micki, good to talk to you again.

Micheline Maynard: Thank you, Kai.

Ryssdal: You know there are a lot of car plants in this country not run by Ford, GM or Chrysler. So, if one of the Big Three does wind up shutting down, is there a chance that those foreign carmakers that make cars here in this country could pick up the slack?

Maynard: I think that they could pick up a little bit of the slack. The plants that are run by Toyota, Honda, Nissan, actually have some extra capacity. The plant that Toyota has done in San Antonio, Texas, for example has actually been closed because they were making too many pickup trucks.

Ryssdal: OK, so that’s on the production side. They could make the cars and get them to market. What about the people that Detroit would inevitably have to lay off?

Maynard: That’s a touchier subject because not only did the car companies pick the states where they wanted to be, they hand-picked the workers as well. And nobody will say we deliberately picked workers that were against joining unions, but nobody has unionized any of those plants. So, I think it would be an uphill battle for somebody who was a union member at a Detroit plant to go down south and try to get a job at one of those non-union plants.

Ryssdal: Let me just throw a parenthetical question in here. Since we are buying less cars in this country, that means we need to sell less cars. So even if there is a bailout, Detroit is going to be smaller, there are going to be layoffs.

Maynard: That’s absolutely true. Dealers go out of business day by day by day just because of the economic crunch. And two years ago, the automakers sold about 17 million cars, it looks like they’ll sell about 14 million this year. And it’s possible that that will drop to about 12 million next year. So, as everything goes down, everything shrinks as well.

Ryssdal: Let me pick up on that point you made about dealers. As Ford and GM and Chrysler stop selling cars, and their dealerships inevitably go out of business, are we going to see on those big auto mall streets that we have all over this country, expanded Toyota and Honda dealerships?

Maynard: I don’t think so. You know General Motors, I believe, has about 6,000 dealers in the United States and Toyota only has 1,300 if you include Lexus. Their goal is not to add more dealerships, their goal is to have more sales per dealership. That keeps everybody in the dealerships happy. They’re making money. They would just as soon keep the dealerships at the same number they’d just like more business in them.

Ryssdal: So, what’s your gut telling you, Micki? Is there going to be a bailout, first of all, and if that does not come then what happens?

Maynard: I don’t think there’s going to be a bailout in this round. I think it’s very possible that when President Obama is in office that they’ll give it anther try. What’ll happen between now and then are going to be some very difficult choices for the Detroit car companies. They may try to hang on until they have the hope of another shot at a bailout, or they may have to go ahead and look at some kind of a reorganization either inside bankruptcy protection or outside of it.

Ryssdal: And would that necessarily be a terrible option?

Maynard: It’s a very painful option. But I’ve covered six bankruptcies in the airline industry and many of those airlines came out even stronger and leaner than they were before. It’s not an easy thing for workers to face, but on the other hand, jobs are preserved and companies have a little bit brighter future.

Ryssdal: Micheline Maynard covers Detroit for the New York Times. Thanks Micki.

Maynard: My pleasure.

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