Bailout may have little impact here
Even if the federal government makes loans to the U.S. automakers, analysts say the money would do little to boost the fortunes of two assembly plants and thousands of autoworkers in the St. Louis area.
In fact, any emergency aid for Chrysler LLC and General Motors Corp. is expected only to allow the companies to avoid bankruptcy — at least for now.
"This is basically to keep the lights on while they enact their turnaround plans," said Aaron Bragman, an industry analyst for IHS Global Insight.
GM and Chrysler are running out of cash and face bankruptcy without some sort of assistance. Ford Motor Co., which is in somewhat better financial shape, has been seeking a line of credit. After efforts to pass a $14 billion bailout collapsed in Congress, Bush administration officials said Friday they will seek other ways to provide financial support for domestic automakers.
"It’s likely they will get some sort of help," said Jesse Toprak, senior industry analyst for auto information website Edmunds.com.
Several factors have pushed GM and Chrysler, which have plants in Wentzville and Fenton respectively, into dire financial positions. A deepening credit crunch, lower sales, ongoing high labor costs and sudden shift from profitable pickups and sport utility vehicles have battered domestic automakers.
On Friday, GM revealed deep production cuts in the first quarter of 2009, which included more down weeks at its Wentzville plant. Although the latest reductions in auto manufacturing are temporary, they follow a steady decline of permanent job losses in the St. Louis region.
In late 2003, the Detroit Three still maintained a relatively robust local manufacturing presence. Auto assembly and parts manufacturers employed about 11,400 people, said Russ Signorino, a labor market analyst with United Way of Greater St. Louis.
In 2006, Ford had stopped production at its Hazelwood plant. By the beginning of 2007, Chrysler reduced the Fenton minivan plant to one shift, then cut production at its pickup plant in September.
Today, Chrysler and GM employ less than 3,500 workers locally.
Get more business news, blogs and opinionVehicles made in the St. Louis area aren’t selling as well they once did, Signorino said, so automakers have been cutting back production.
But the job losses are not exclusive to the St. Louis area.
Based on lower sales, Chrysler and GM have announced thousands of factory layoffs this year and are cutting salaried staff in order to reduce expenses and conserve cash cheap payday loan. These moves have been part of ongoing turnaround plans at both companies.
Reductions in employment likely will continue, regardless of any federal aid, analysts said. IHS Global Insight expects light-vehicle sales in the United States to be 11.2 million next year, down from this year’s dismal estimate of 13.1 million. In 2007, sales totaled 16.1 million vehicles, a drop from the peak of 17.3 million in 2000.
"The recession is supposed to be a heck of a lot worse next year," said George Magliano, IHS Global Insight’s director of automotive industry research for North America.
The bleak prediction for 2009 underscores just how important financial relief has become for the Detroit Three, Magliano said.
The funding could come from the $700 billion Trouble Assets Recovery Program, or TARP, the financial industry bailout plan enacted in October. All but $15 billion of the first $350 billion has been dedicated to troubled banks or insurance companies, and the Treasury Department is barred from dipping into the second $350 billion without a formal notification of Congress.
The Bush administration said Friday that no decisions had been made on the size or duration of the new plan, or what type of concessions might be demanded from the automakers, their workers, stockholders or others.
Magliano and other analysts anticipated automakers will return to Washington next year — when Obama takes office and more Democrats are in Congress — for help with a longer-term plan.
"What we’re dealing with now is a short-term patch (for the automakers) to survive through spring," Toprak said.
More plant idlings and job cuts are possible nationally as the recession persists. Locally, the outlook is murky at best, analysts say.
Shifts at Chrysler’s Dodge Ram plant in Fenton are safe, at least for now, because there’s some stability in the full-size pickup market, Toprak said. But GM’s full-size van plant and Chrysler’s now-idled minivan plant face more uncertainty, because demand for those vehicles has been so weak, he added.
In the weeks ahead, bankruptcy is still a "big risk" for one or more of the automakers, Bragman said. Such a scenario would put more jobs in doubt, as well as benefits for current workers and retirees. Retirement benefits also could come under government control in a bankruptcy, and there’s no guarantee workers would receive the terms they’re getting now if that happened, Bragman said.
Any benefits changes would affect thousands of current and retired union workers in the St. Louis area.
"Frankly, I think workers should be terrified at the moment," Bragman said.
The Associated Press contributed to this report.
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