This post is a response to Joseph Romm’s post, “Mo’ money, mo’ problems,” on the future of the American automotive industry.
Most Americans rely on their cars to drive to work or leisure but never realize the auto industry is important to their pocketbooks, too.
When the economy sinks, consumers delay purchases … starting with a new car. Consumers who want to buy may not get credit, and 90 percent of new autos are financed.
It’s a depression in the auto industry today.
October auto sales were the lowest in two decades, down 32 percent from a year ago. When adjusted for population growth, 2008 auto sales may fall to post-World War II levels. In September alone, 1000 dealers closed their doors.
The entire industry’s condition affects far more than just a dozen automakers. In all 50 states, communities big and small rely on the greater auto industry. Just like bank failures rippled through the economy, the auto industry has a large ripple effect … one that reaches to your community.
Nationwide, 13 million jobs are auto-related. Every auto plant job generates another five jobs among suppliers and the surrounding community; by comparison, a Wall Street job generates two additional jobs.
Even if there is no auto plant nearby, your community may depend on auto manufacturing. The auto industry is one of the biggest purchasers of aluminum, copper, iron, lead, plastics, rubber, textiles, vinyl, steel, computer chips and more.
Auto sales account for 20 percent of U.S. retail sales and generate tax revenues of more than $10 billion, so the plunge in auto sales is affecting your state’s treasury right now.
It is vital to the U.S. economy to have a healthy, competitive auto industry, and the next 100 days are critical.
The potential failure of one or more automakers would cut up to 2.5 million jobs in the first year as production ground to a halt throughout the industry, according to a report released on Nov. 5 by the Center for Automotive Research.
That may be why President-elect Barack Obama offered his support for our industry:
Few have been harder hit by our credit crisis than the workers who make our cars and the companies that supply their parts. Now, when it came to rescuing Wall Street, Washington didn’t waste a minute. But now that autoworkers are suffering, Washington’s put on the brakes. It turns out it could take a year for the auto industry to get the loan guarantees we passed a few weeks ago. Well, the workers who are being laid off and the companies that are seeing their sales drop — they can’t afford to wait a year, they need help right now.
There is cause for hope in the auto industry … because we are reinventing the automobile.
In last year’s energy bill, Congress approved $25 billion in loans to help automakers retool for the next generation of fuel-efficient autos. We supported the mileage increase in the energy bill, and automakers are working to achieve the unprecedented 40 percent increase in fuel economy across our entire fleet.
In 2009, dealer showrooms will boast about 140 models with highway fuel economy ratings of more than 30 miles per gallon. That’s an increase of 25 percent over the number of 30 mpg products offered in 2008.
Model year 2009 vehicles will include 25 hybrid and eight clean diesel models, as well as autos employing fuel-efficient technologies like continuously variable transmissions and cylinder deactivation. Many products planned for just a few years from now don’t run on gasoline at all.
But money makes progress possible.
Building autos is a capital-intensive industry. A new power train can cost $1 billion to build. The federal government estimates that the new mileage standards will cost automakers $115 billion by 2020.
So long as our industry remains viable, we’re on the right track.
Our industry plans to be on the leading edge of the new energy economy. Our work towards meeting a national solution could create the biggest wave of “green jobs” our nation has seen as automakers produce more cars that use less fuel and produce less carbon dioxide.
But first we need to get through the next year.
The Alliance of Automobile Manufacturers is a trade association of 11 car and light truck manufacturers including BMW Group, Chrysler, Ford Motor Company, General Motors, Jaguar Land Rover, Mazda, Mercedes-Benz, Mitsubishi Motors, Porsche, Toyota and Volkswagen.