For days, I watched interviews with Senator Dick Shelby of Alabama all over the media. He repeats his opposition to the $25 billion dollar bailout that GM, Ford, Chrysler and their supplier companies promise to pay back. He knows that almost 2.6 million Americans will be out of work if these companies fail. If that is the case then why would the good Senator from the Yellowhammer State believe that the domestic automakers "best option would be some type of Chapter 11 bankruptcy?"
I wondered why and then came across an article in Salon.com called Why the South opposes a bailout for Detroit by Andrew Leonard. He wrote:
Alabama ranks sixth on the list of states with the most autoworkers -- by last count 130,000 jobs directly or indirectly depended on the auto industry. Hyundai, Honda and Mercedes-Benz all have state-of-the-art plants in Alabama, producing, among other things, the kind of low-gas-mileage luxury sport utility vehicles that most U.S. consumers are currently reluctant to buy. Toyota manufactures engines for its Tundra trucks and Sequoia SUVs in Alabama. Scores of other parts suppliers thrive, employing non-union labor in a right-to-work state. Alabama also ranks sixth, nationally, in production of cars and light trucks in the United States. All Honda Odyssey minivans sold in the U.S. are made in Alabama. The Hyundai Santa Fe SUV is made in Alabama."
So guess what state benefits from the possible big three bankruptcy...
How about states such as Alabama and the rest of the South, which have long been busy turning the industrial Midwest into the Rust Belt, well before outsourcing and offshoring and globalization became working-class swear words.
According to the Alabama Automotive Manufactures Association, there are there are 285 plants and 134,226 jobs in AL. Total payroll for Alabama plant workers is nearly 5.2 billion dollars a year. Additional money on top of those 5.2 billion dollars annually is more than enough of a reason for Senator Shelby’s concern-trollery. Dick Shelby wants to become the sole power player in the car industry. He and Governor Bob Riley would like Alabama to become the new "Detroit South" without the unions. This is nothing more than a power play by Shelby and other opposition leaders who want to control the auto industry and who want to destroy unions that protect workers in the Midwest.
If you did not watch the United Auto Workers news conference yesterday, Ron Gettelfinger, the President of UAW addresses the urgent need for a loan. He talks about the American autoworker and the retiree UAW represents. The worker should not be forgotten amongst all the talk about private planes. Here is a sample of the press conference and transcript below:
Since 1992, states where we have transplants have located have put in over $3 billion dollars in incentives and I would point out that is the money that the state settled for and I want to go specifically to Alabama if I could for a minute. We have Hyundai Motor Company that got $252 million in incentives. Toyota there got $29 million in incentives. Honda, $158 million and Mercedes $253 million in incentives. It just seems odd to us that we can help the financial institutions in this country and that we can offer incentives to our competitors to come here and compete against us but at the same time, we are willing to walk away from an industry that is the backbone of our economy.
Mr. Gettelfinger's statement is self-explanatory. He deliberately mentions plants in AL but my only criticism is that he did not mention one more thing. Many of the parts from Toyota and other foreign owned companies with plants in Alabama come from the same suppliers who provide parts for GM, Ford, and Chrysler.
There are two auto industries in the USA. The first one, based in and around Detroit, is GM, Ford and Chrysler. The second is sprinkled around the Southeast and includes foreign automakers Toyota, Honda, Subaru, Nissan, BMW and Mercedes-Benz.
Parts suppliers spread out between them "like pearls on a necklace" along the highways connecting the South and the Midwest, says Thomas Klier, senior economist at the Federal Reserve Bank of Chicago.
So, do you think Toyota is happy about the possible fall of the big three? Nope, they are worried too!
Suppliers in the past tended to focus on one customer, but now almost all have overlapping customer bases. That's why Toyota worries about the Big Three. About 75% of Toyota's suppliers here are North American firms that also make parts for Detroit.
The entire automobile industry is interconnected. If the big three goes down, the suppliers cannot sell their parts at standard levels. If the suppliers cannot sustain their profits, then their employees are laid-off. If supplier workers are laid-off, then Toyota and other foreign companies cannot get their parts too and eventually their Alabama plants will have to close. The political posturing of Senator Dick Shelby is pure BS! He wants to kill Detroit and kill the unions but he may also kill Alabama’s automobile industry in the process.