By now many of the regulars here in DailyKos's and Firedoglake's community have read about and signed the petition to boycott JP Morgan Chase; we know there are a lot of jobs on the line and the economy in Michigan let alone the country cannot support the weight of another 300,000 to a million more unemployed if we lose one more of the Big Three automakers.
Sure, some will scoff at the numbers, but they're the real deal. My household is one of those which has already been impacted by the tanking automobile market, providing evidence as to the scale of the problem.
You see, one of the big misconceptions most people outside of the state of Michigan and outside of the automotive industry have is that the Big Three are automakers. In truth, they have become auto designers and auto assemblers. Everything else in between these two points can be made by another company, and in many cases, already has been made and supplied to one or all of the Big Three by a veritable shadow auto industry made up of a myriad of companies.
Take any one component of your car and it's likely that some other supplier had a considerable role in its manufacture, perhaps even its design.
Just ask Emptywheel; her spouse worked for a supplier which manufactured the wiring harness for Chrysler vehicles.
The supply industry is a story of my family and friends. My father used to be a plant manager for an outfit that made door seals, and before that worked at a firm that made pistons and other engine components. Some of my acquaintances work for another company that manufacturers the seats in many American cars. And yet more of my friends work for a chemical company which makes the plastic resins for many automotive components.
None of these people work for the Big Three, but all of them have counted on the Big Three for their livelihood. And all of them have felt the real threat to their jobs; some have had pay cuts, cuts to benefits, cut to hours, and some have simply lost their jobs with no prospects of returning to the same kind of job in the same industry.
Many of these much smaller companies supporting the Big Three have operated for years on bare margins; it's been this way since the late 1980s after changes to purchasing practices and ethics at the Big Three changed under the leadership of General Motors' VP Jose Ignacio Lopez de Arriortua. There was a radical shift away from a nascent total quality management process embedded in purchasing to a process totally driven by price -- and there've been casualties along the way, including the quality of American cars. The pressure on suppliers has been intense for years to find a way to make any profits at all, since at any time the automakers might expect a "rebate" on their purchase.
Yeah, imagine fighting a tough and bloody bidding war to supply a well-designed and inexpensive component or system, winning the low bid and making a very slim margin (or sometimes none, expecting to make it up on cost savings throughout course of the contract), only to have your 800-pound gorilla of a customer ask for a rebate at the end of the contract, before they make the last payment, so that they could make their own scanty profit, pressed as they were by rising health care costs.
It's happened, and a lot more frequently than the average car-buying Joe SixPack realizes. It's a dog-eat-dog, rough-and-tumble world servicing the automakers.
As we all know well, the economy took a nose dive in 2008 after a very grim summer with $4 a gallon gasoline; the stock market tanked, reducing the amount of assets people have to spend on vehicles while suppressing their urge to spend money at all. And voila, automakers which may have been flirting with profitability -- and on the backs of suppliers -- are now in free-fall, taking the entire industry with them. Suppliers which were on the bubble before are now up against bankruptcy and may not survive long enough to be a part of the newly revamped auto industry.
The Obama administration must have heard the pleas of auto suppliers as they've ponied up $5 billion in assistance. It's a pittance considering the size of this shadow auto industry, but it's something.
But look at the nifty graphic here, taking note of the lone green bubble labeled OEM capital equipment manufacturers...yup, they are getting bupkis. Nil. Nada.
And yet they are expected to be there when all the dust settles, after the economic hurricane has done its worst, waiting eagerly to begin the business of supplying all the equipment used by the entire industry, from the chemical companies mixing and forming resin to the assembly line itself on the plant floor of a Big Three automaker.
They may not be there.
Some of them are already gone. I think of the tiny firms, some of them only a handful of people, who represented the entire business, who provided highly unique products; they've had to shut their doors and walk away from their entire lives which were wrapped up in those businesses.
This week has been grueling in this household; my spouse has been working late into the evening each day pulling together all the financials, in preparation for what appears to be an orderly shutdown. His company makes equipment which moves parts and vehicles around on plant floors (reducing the number of workers required) and tests the parts before they are released into production (improving quality); their largest customers have been Big Three automakers, including Chrysler, as well as other kinds of vehicle and construction equipment firms.
But nobody is buying cars; in spite of federal stimulus monies released and stock prices trending up, nobody yet is buying construction equipment, and sales of other vehicles like trucks have similarly plummeted. Which means nobody is buying the equipment to make these items.
Nobody around the entire world is buying. It's not just a domestic problem; requests for quotes and sales from all across Asia were common over the last two years, but they are now dried up.
And now after wage/salary cuts, and after cutting staff, there's nothing more to cut; the waiting can't go on as the bank financing the business won't tolerate any losses from what it has deemed a "high-risk" business. Yes, if a company sells to the auto industry and is capital intensive, they are high-risk and their credit is cut off in a heartbeat.
Which makes Chrysler's situation all the more trying; we know that Americans want to buy cars, but they have had difficulty with getting credit when they haven't had difficulty with keeping their jobs. And the credit squeeze on the entire supply chain is problematic, making it difficult for the supply chain to meet customers' needs at some nebulous point in the future. A liquidation of Chrysler will not fix any of this, will only make it catastrophically worse.
And while we're all waiting for the soft-handed, expensively suited giants of banking to wring out of the entire auto industry whatever it is they are seeking, there are hundreds of thousands of people who are stuck in limbo and planning for the worst, suffering mental torment in advance of what appears to be the inevitable hell of job loss.
Sometime in the next few weeks, this household will likely make that final transition; the chances of any other option are extremely slim. The bank will tell the holding company to yank the plug on the plants which make capital equipment, and my spouse will have to tell his workers they are done. There will be no employee left behind, not the person whose recently had surgery and is in chemotherapy, nor the single parent struggling to keep a roof over their head and feed and clothe their child.
And there will be no sparing us; my spouse will collect his first-ever unemployment checks which won't cover the COBRA for health care, and we will have effectively lost our investment in the company. We'd hoped it would be enough to pay for a kid's college tuition...
At least we'll be so happy -- we and the hundreds of thousands of other working families who exist in this netherland between automaker and suppliers -- that JP Morgan Chase will get all of their $2.5 billion loan back from what's left of Chrysler after liquidation.
After all we've been through, won't that be a shot in the arm for us all?
Sign the petition here. Boycott JP Morgan Chase.