Big 3 Execs Ask For More Aid From The Legislature

Anthony Fontanelle
June 8, 2007

The Detroit Big Three CEOs earlier told a Senate-sponsored manufacturing forum that the government can do more to aid the struggling domestic auto industry. The executives called for more help on trade and health care policies.

"While our industry has supported trade liberalization, we have seen a diminishing focus on manufacturing in United States trade policy," Ford President and CEO Alan Mulally said, according to a copy of his prepared remarks. "In recent years, there seems to have been a willingness in trade negotiations to overlook or even trade off manufacturing's interests for those of other sectors that are perceived as either sacred cows or the new frontier," Mulally said.

Chrysler Group CEO Tom LaSorda said thatthe auto industry is at a ‘crossroads.’ He added, "We are either going to adjust to the realities of the global economy or we will not survive. Our current cost model does not work and our competition gets fiercer every day.”

LaSorda noted "unfortunate parallels" between the automotive and the old steel industries, including "large numbers of bankruptcy filings by auto suppliers and steel companies, large reductions in the numbers of employees and staggering retiree costs that caused more than 200,000 retired steelworkers to lose healthcare benefits."

Controversies in the auto industry come like an accelerating EBC Redstuff. Now, private equity firms are significantly involved in the domestic auto industry. Earlier, the Cerberus Capital Management LP, a leading private equity firm, agreed to purchase 80.1 percent shares of DaimlerChrysler AG’s Chrysler Group for 7.4 billion.

"The auto industry is caught in a box where overcapacity, incentives, brand proliferation, and the fight for market share has led to negative net pricing," LaSorda said. "We need our government to understand how its actions can either encourage, or set up roadblocks, to American competitiveness."

GM Chairman and CEO Rick Wagoner said the "domestic auto industry matters a lot," according to his prepared remarks. "Even at a time when our companies are taking the tough, but necessary actions to compete globally, GM, Ford and Chrysler remain absolutely vital to the U.S. economy," Wagoner said. He asked for congressional help "in addressing the woeful shortfall in E-85 distribution. If market forces don't rapidly increase the number of fueling stations that offer E-85, then regulatory solutions will be needed."

Additionally, Mulally called on Congress to oppose the South Korea Free Trade agreement, as did UAW President Ron Gettlefinger. He stressed the need for "a much needed re-emphasis on manufacturing as a cornerstone of American trade policy."

To note, U.S. has an $11 billion deficit in auto trade with South Korea, 82 percent of the total trade deficit between the countries. What more, over 60 percent of the $85 billion trade surplus in Japan with the U.S. is in auto products.

South Korea is the ninth largest motor vehicle market in the world, yet more than 96 percent of all cars sold there are made in South Korea, Mulally said. "This defies the market trends worldwide, it defies the logic of consumer choice, and it is a situation that would be impossible to sustain without the active intervention of the Korean government. South Korea exported 700,000 vehicles to the US market while only 4,000 vehicles were exported from the United States to Korea.”

LaSorda said that more must be done on health care costs. "I believe we could all agree that some national approach to the healthcare problem is ideal but likely not feasible. Given the political reality, there are some important interim steps Congress could take to help bring more rationality to the healthcare market," LaSorda said.

Source:  Amazines.com