US industry warns of auto sector collapse

07 November 2008 16:20  [Source: ICIS news]

Auto industry warns of collapseWASHINGTON (ICIS news)--US manufacturing and other business leaders on Friday warned that the nation’s auto industry is on the verge of collapse and, if allowed to fail, would take the broader economy with it.


John Engler, president of the National Association of Manufacturers (NAM), issued a statement saying that “the situation is dire” for US automakers.


“We’re talking about close to a million jobs in America, we’re talking about a lasting impact on our industrial production in the US,” Engler said.


“We simply cannot afford to let the auto industry fail.”


The big three US automakers - General Motors, Ford and Chrysler - have been meeting with leaders in Congress this week and have appealed for an immediate loan package of $25bn (€19.75bn) to keep the industry afloat until the new year.


Some in Congress have argued against the bailout on grounds that the federal treasury cannot continue to throw money at every US business sector that gets into trouble.


But Engler cautioned that collapse of the US auto industry, or even part of it, “would have a massive economic ripple effect on the entire US economy” because automobile manufacturing sustains a broad spectrum of supplier industries, including chemicals and plastics.


Bruce Josten, executive vice president at the US Chamber of Commerce, told a press conference that “the auto industry has a huge footprint across our economy”.


“The auto industry is the largest buyer of steel and glass and other commodities, and it is the largest buyer of computer chips as well,” Josten said.


He said that while the auto manufacturing industry directly employs 350,000 workers, the sector indirectly supports as much as 10% of the 154m-strong US workforce.


US automakers have been reporting ongoing and major financial losses amid sharp declines in consumer spending, credit availability and job losses.


Engler noted that the industry is anticipating a deteriorating outlook for 2009 with as few as 12m car sales.


While that is a significant number of units, he said it pales in comparison with the average 17m annual new car sales seen over the three years prior to the economic downturn.


He cautioned that even with a new federal loan package, the auto industry “will likely undergo a fundamental structural change before January 20th”.


That is the date on which President-elect Barack Obama will take office.


Engler said it is essential that Congress and the Bush administration act now to sustain automakers through the rest of this year.


“If Chrysler were to disappear tomorrow - and it is the smallest of the big three automakers - you would see one million jobs taken out of the economy,” including workers in subsidiary industries that supply the auto sector, he said.


($1 = €0.79)


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