With GM, Chrysler and Ford reporting losses because of the economic downturn and consumers not willing to buy, the future of the big three is questionable. The first two companies have already received billions in bailouts from the government and are requesting more money so they are not forced into bankruptcy.
At a National Press Club event, Craig Cather, president and chief executive officer of CSM worldwide and Eric Fedewa, vice president, Global Powertrain Forecasting discussed the future of the three companies and three critical questions that lawmakers and government officials will be debating through March such as:
• Are GM and Chrysler viable companies?
• If they are should they be restructured in or out of bankruptcy with additional government assistance?
• Should California and other states be granted waivers to regulate CO2 emissions under the Clean Air Act, and
• How will waivers impact the stability of an already fragile auto industry?
Cather said the “Detroit three were hit hard.” He went on to explain where things went wrong. Cather said “some problems with the companies are uncompetitive wages and benefits, too many dealers, excess capacity and redundant brands.” There are too many franchises and the companies are producing more cars than they are selling. The companies are also selling products that are similar in body style and make, so the companies are selling products that are competing with each other.
Cather also discussed how Detroit responded to the loss and said “the companies were restructuring before they came to Washington, just not fast enough.” Some things the companies have done to restructure are job cuts, plant closings, cost reductions and brand eliminations. Cather also said “credit is starting to ease, but the increase in unemployment in the U.S. could affect sales. Cather said “standards on consumer loans are loosening and banks are willing to make loans.” He also said there is a low demand for consumer loans and the increase in U.S. unemployment may be why only one is buying. He said “every one percentage point shift in unemployment affects vehicle sales by 600,000 units”
Cather also commented on the company’s viability plans and said “GM put together a good case and has conservative plans to reduce structural costs.” He said “Chrysler is planning 3.8 billion cost reductions by 2009 and their claims can be challenged.” Cather remained hopeful and said “by 2012 the market will return to trend.”
Fedewa discussed California’s request for a Clean Air Act waiver to regulate CO2 emissions. The Clean Air Act is the law that defines the Environmental Protection Agency’s responsibility for protecting and improving the nation’s air quality and the stratospheric ozone layer. Fedewa believes “allowing California to independently regulate CO2 emissions will further damage companies that are struggling, like Ford, GM and Chrysler, and destabilize healthy companies like Toyota and Nissan.” He said “the impact of granting the California waiver will decrease vehicle sales, frustrate consumer choice and increase compliance costs.”
Fedewa said he believes “setting a single national standard for fuel economy and C02 emissions, and aligning other policies to create a robust and stable market for fuel-efficient vehicles are in the national interest.” One way to increase the demand for fuel-efficient vehicles is to make filling the gas tank more expensive. Fedewa said “a variable fuel tax that sets the minimum price per gallon would help ensure that there is no backsliding by consumers away from fuel-efficient vehicles.”
Alanna Hultz is an intern at the American Journalism Center, a training program run by Accuracy in Media and Accuracy in Academia.
