Auto industry reps meet to discuss how bailout will affect Indiana

For the U.S. auto industry, it is too little too late.  

President Bush announced a government loan to tide over the Big Three but many fear this will not be enough to save the industry.

Representatives from the auto industry met Monday in Indianapolis to discuss the need for government loans to save the auto industry.

Kokomo Mayor Greg Goodnight, and Marion Mayor Wayne Seybold organized the roundtable discussion to raise public awareness of the current troubles of the Big Three automakers. They also wanted to the set the record straight by claiming the new plan was not a government handout, but a loan.

Congressman Joe Donnelly spoke at the discussion. He represents several areas including Kokomo, which could be affected by the auto industry collapse.

"This is not a bailout. This is a bridge loan," Donnelly said. "There is a public perception that the automakers came begging to Washington without offers or solutions."

Officials reached an agreement on the terms of the loan Dec. 19 after several failed attempts earlier this month. The new plan will loan $13.4 billion to tide the companies over, and an additional $4 billion will be available if needed.

By March 30, they must present a business plan to show they will be profitable in the future. They must eliminate jobs, close factories and close some dealerships.

The loan must be paid back with interest. However, this is not the first time the industry has asked for a bailout. Chrysler was given $1.5 billion in loans that were paid back with interest and helped the company survive another 30 years.

Indiana is home to several manufacturing plants that will be affected if the auto industry collapses. GM has four plants in Kokomo and one in Delphi, a company which manufactures auto parts used in GM vehicles, has one. More than 8,000 jobs would be lost if the plants are shut down.

The workers will not be the only ones losing an income.

"The city collects $16.9 million in property tax from GM and Delphi," Goodnight said. "The city would lose 40 percent of its budget."

This is bad news for a city that was recently named one of the fastest dying towns in the United States in a Dec. 9 Forbes Magazine article.  

Marion has already suffered job losses in the past 10 years with the closing of several factories. Seybold said the city has been able to recover recently by expanding its industries to include software, logistics and other service-based industries. Seybold said he fears a collapse could destroy the recent economic progress.

"If the big three were to go down, it would set us back 10 to 15 years," Seybold said.
 
Car dealers will also suffer from the collapse. Rich Burd, owner of Burd Ford in Indianapolis, said dealerships provide "good middle class jobs" and contribute greatly to tax revenues.  

"A dealer can raise as much as $26,000 in sales taxes in one day," Burd said. "The government cannot afford to lose the money in taxes."  

One reason the companies might be failing is due to the high labor costs. The average factory employee makes $71 an hour when all benefits are included, compared to the $49 per hour earned by employees at Japanese companies such as Toyota or Honda.

High wages, along with rising health care costs and pensions, have also contributed to the crisis. United Auto Workers has negotiated a new contract that will lower pay to $53 per hour starting in 2010. New employees will start at $15 per hour and will have no defined pension or retiree health care program.

Maurice "Mo" Davison, director or the U.A.W for Indiana and Kentucky, said though many people blame union members for the three companies' financial woes, he claims that the financial collapse on Wall Street and high gas prices caused to companies' failure.

"The big three built what consumers wanted," Davison said, citing the drop in sales due to soaring gas prices. "And now they must adjust."

The United States is not the only country where automakers are suffering. Canada agreed Monday to lend more than $4 billion to GM and Chrysler, which operate plants in the country. Japanese-owned Toyota has reported its first loss in 70 years and will operate at a $1.7 billion loss.

Talks about astronomical amounts of money have little meaning to the ones hardest hit by the crisis. Factory workers relying on wages, health care and pensions once promised by the big three said they are wondering how they will survive the economic crisis.

U.A.W local 23 representative Bill Matthews has worked for GM for 35 years. He said everyone will be hurt by pay cuts and factory closings.

"The real question is, can America survive?"