Carmakers in Washington say they're are asking for a hand, not a handout
Washington —The auto industry continues to push for federal guidance and relief as auto plants, suppliers and dealerships shut down across the nation due to coronavirus, and details of a $2 trillion relief package remain unsettled.
Although some proposals being discussed in Washington earmark rescue funds for certain industries, including airlines, automakers have not asked for a rescue. Instead, they want relief from Congress in the form of loan guarantees, tax deductions for paid leaves to employees, and deferred corporate tax payments. And they want clarity on whether auto dealerships are "essential" businesses as states declare emergency shutdowns.
U.S. Rep. Debbie Dingell, D-Dearborn, said automakers are wary of appearing to ask for a bailout a decade after the federal government was forced to step in to save General Motors and Chrysler. GM and Chrysler received $51 billion and $12.5 billion respectively in federal bailouts a decade ago. Ford Motor Co. did not take federal money.
"They don't want to be seen as asking for handout," she said. "They just need to have liquidity like all business do. They want to take care of their workers."
In addition, the industry has asked for a delay in the June 1 entry into the replacement for the North American Free Trade Agreement. Dealers have also asked the White House that they be deemed essential services and exempted from emergency shutdowns at the state level.
A $2.5 trillion bill in the Democratic-controlled House would force lenders to grant temporary reprieves on car payments as well as mortgages, but negotiations are more focused on the possibility of a deal being hammered out in the Republican-led U.S. Senate.
It appears carmakers would be able to apply for relief via a $500 billion fund for distressed corporations that is included in a version of the stimulus package released by Senate Majority Leader Mitch McConnell, R-Ky., but Democrats are working to attach restrictions and oversight to the business bailouts. Dealerships are likely to qualify for loans that would be made available to small businesses with under 500 employees under the proposed legislation.
U.S. Rep. Haley Stevens, D-Rochester Hills, who was chief of staff of the U.S. Treasury task force that planned and oversaw the financial bailout and bankruptcies of Chrysler and GM, is calling for the Federal Reserve take steps to provide necessary liquidity to the domestic auto industry and its supply chain.
In an interview with The Detroit News on Tuesday, Stevens said it is looking like automakers will come out of negotiations between Democrats and Republican leaders in Washington "pretty good.
"We've got small businesses covered," she said. "We've got loan guarantees through the federal reserve. And obviously the big guys get access to the large pool."
Stevens said it is important to differentiate between what automakers are asking for now and the federal intervention that she oversaw a decade ago prior to coming to Congress.
"We're not talking about a bailout," she said. "This is not a bailout. We're securing assets. We've got to think about what kind of country we want to be when we come out of this COVID-19."
Stevens, who is sheltering-in-place in Michigan, said lawmakers are still trying to figure out the mechanics of voting remotely to potentially approve the package quickly without having to return to Washington, where several lawmakers have been confirmed to have tested positive for the virus.
"We need to be moving pretty quickly here to ensure we've got an industrial base on the other side of this," she said, noting that Democrats held a two-hour conference call on Tuesday to discuss the ongoing negotiations. "We've got to have debate on this bill. I won't be voting for something that doesn't secure the future of our auto industry."
John Bozzella, president and CEO of the Alliance for Automotive Innovation, said in a webinar hosted Tuesday by the Ann Arbor-based Center for Automotive Research that the message appears to be getting through to lawmakers.
"The focus on liquidity is critically important," Bozzella said. "I have to say that I feel that administration as well both the House and Senate and members of Congress in both parties recognize that.
Bozzella added that the shape of the auto industry's eventual recovery could look different than previous rebounds by the industry after the 9/11 terrorist attacks and the 2008 financial crisis.
"How long do the closure measures go?" he said when asked about the industry's prospects for recovery. "How long are we going to keep the economy shut down? How deeply the effects are going to be felt? Without knowing that, it’s hard to guess."
The flurry of activity in Washington comes amid dire forecasts for the auto industry as Michigan and other states issue shelter-in-place orders.
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 5.7 million fewer vehicles could be sold this year in the United States in a worst-case scenario where government shutdowns last through the summer, down from initial projections of 16.9 million vehicles sold, says forecaster ALG. Even if most shutdowns were lifted by May 1, ALG estimates sales for the year would be down 1.6 million.
Auto plants were across North America were shut down over the past several days. Although some of those shutdowns were scheduled through the end of the month, Michigan Gov. Gretchen Whitmer’s emergency order lasts through April 13. Ford said Tuesday it would extend its shutdown of North American plants indefinitely.
Adding to the confusion, President Trump is signaling he wants to reduce the social-distancing measures against the advice of medical personnel on his own staff.
"I'd love to have it open by Easter, OK? I would love to have it open by Easter. I will tell you that right now," Trump said in a virtual town hall broadcast Tuesday on Fox News.
"I would love to have that — it's such an important day for other reasons, but I'll make it an important day for this, too," Trump continued. "I would love to have the country opened up and just raring to go by Easter."
Against that backdrop, the auto industry is looking for clarification as to whether sales and leasing operations count as “essential services” as states look to federal recommendations as they put together shelter-in-place orders. The recommendations clearly say that repair facilities are essential, but questions remain about the rest of dealerships that are attached to those service departments.
"Not all vehicle sales are discretionary consumer purchases," the Alliance for Automotive Innovation, National Automobile Dealers Association and American Truck Dealers, National Association of Minority Automobile Dealers and American International Automobile Dealers Association wrote in a letter to the president Monday.
"A significant number of dealership sales transactions occur because a consumer or business is in immediate need of a replacement vehicle for ... basic transportation. This clarification is particularly important as various transit services have been curtailed or eliminated due to the public health recommendations about social distancing."
As automakers lobby Congress and the White House for relief, some have begun pitching in like they did in the World War II-era Arsenal of Democracy. GM, Ford and Fiat Chrysler have been working to increase production of vital medical equipment such as ventilators and respirators as the nation tries to combat the coronavirus pandemic.
Said Dingell, "They've all worked really hard to figure out how they can could contribute to personal protective equipment."