Carmakers press Washington for coronavirus relief
Washington — Washington is waking up to the coronavirus pandemic's impact on the auto industry and the reality that carmakers will need to join the growing list of industries asking for financial assistance.
Automakers and parts suppliers want relief from Congress in the form of loan guarantees, tax deductions for paid leaves to employees and deferred corporate tax payments. Governors Gretchen Whitmer of Michigan and Mike DeWine of Ohio on Friday night called on Congress and President Trump to enact similar measures to protect the industry and the jobs it supports. The president signaled he is likely willing to offer a hand to an industry he has long feuded with.
The outlook for the auto industry as a result of the economic and social disruption is grim: March sales could plunge as much as 41% compared to last year, nearly all of that attributable to the outbreak, according to a forecast this week by J.D. Power. Up to 2.5 million fewer vehicles could be sold this year in the United States, a decline of nearly 15%, says forecaster ALG.
In a letter to the leaders of the U.S. House and Senate sent Friday, the Alliance for Automotive Innovation and the Motor and Equipment Manufacturers Association — groups that represent the automotive industry in Washington — urged Congress and the Trump administration to take swift action "to confront the economic slowdown being caused by COVID-19."
In addition to the loan guarantees and tax relief, the groups want to delay the June 1 entry into the replacement for the North American Free Trade Agreement.
"We need swift action from the president and Congress to confront these challenges and avoid devastating job losses," Whitmer said in her request. "Our dedication to working families and businesses must transcend partisanship. That’s why we made this request together today.”
Auto plants and suppliers across North America have begun closing this week as some workers have become infected.
John Bozzella, president and CEO of the Alliance for Automotive Innovation, said in an interview he senses a recognition among lawmakers about the dire straits the industry is likely to face if contagion-related shutdowns and shelter-in-place orders stretch beyond the new fext weeks.
"It's an incredibly fast-developing and rapidly changing environment we're dealing with," he said. "Certainly, we've seen a steep drop in retail sales over the last couple of days and the suspension of production in many plants. What we're seeing is the initial reaction to the public health challenge. What we don't know is how long it will last."
Whitmer raised those points with Trump on a conference call with the nation's governors.
"Obviously, coming from Michigan, my colleagues across the country also have serious investments from the auto industry, and we’re concerned about liquidity up and down the supply chain, and all of the great people that have made the backbone of our economy hum for so long," Whitmer told the president Thursday.
"And I’m just hopeful that as conversations happen around industry — and we will keep this important sector front and center, because we are concerned about ensuring that they have got some paths out back to prosperity as well."
Trump responded: "You’re right a hundred percent. We’re watching the auto industry very much. We’re going to be helping them out, at least a little bit. And they’ve sort of requested some help. And it wasn’t their fault what happened. So we’ll be taking care of the auto industry."
U.S. Rep. Debbie Dingell, D-Dearborn, said Washington is just beginning to come to grips with the impact on the nation's auto industry because plants have just begun closing this week. She said lawmakers have been focused on a possible $50 billion bailout of the airlines industry. The auto industry, including suppliers, has almost twice employees as airlines, Dingell said.
"The reality of closed plants didn't set in because they're just starting to go down," she said. "The companies don't want to be perceived as asking for a bailout."
The hangover from the federal bailout of General Motors and Chrysler in 2008 and 2009 is not helping matters, Dingell added. GM and Chrysler were recipients of $51 billion and $12.5 billion respectively in federal largesse a decade ago. Ford Motor Co. did not take a bailout.
In an interview with MSNBC on Friday, U.S. Sen. Gary Peters, D-Bloomfield Township, said the impact of the coronavirus-driven shutdowns is already showing up in rising unemployment numbers. Peters cited a report from the Michigan Unemployment Insurance Agency this week that showed a surge in claims.
"When you talk about closing down a plant, it's not just folks in that plant," Peters said. "It's a very, very long supply chain throughout our state. It's really throughout the country when you think about auto manufacturing. It's just a key component of the manufacturing sector broadly."
The Ann Arbor-based Center for Automotive Research estimates that a one-week shutdown of the U.S. auto industry would lead to an "annual loss" of 94,400 jobs in the United States, cost $7.3 billion in overall earnings, and siphon $2 billion from government tax revenue. A six-week shutdown would "impact" 566,600 jobs, cost $43.7 billion in earnings and reduce government revenues by roughly $12 billion.
Automakers are focused on assistance measures that would help them to preserve liquidity in their cash flows, said Bozzella, the industry lobbyist.
"Liquidity is really, really important right now he said," he said. "That's what the companies are telling us, and that's what they're telling policymakers."