MOUNT VERNON — While the Big Three automakers are brokering for their own bailout, auto suppliers across the country are taking a deep breath as they sit back and wait for their fate to unfold.
According to John Wilkerson, spokesperson for TRW Automotive Inc., if just one of the three companies falls into bankruptcy, the entire auto supply industry could be in jeopardy.
“The real danger is one (automaker) going under,” he said. “If one doesn’t make it, it’s not as simple as two (automakers) still sanding. Our best guess is that the whole house of cards would come tumbling down.”
Tumbling would be just the beginning if the auto industry came to a roaring halt, the overall affect would be more like an avalanche rolling up millions of employees and the nation’s economy into one giant snowball.
“If this happens, no one could get parts in North America,” Wilkerson said. “These are pretty scary scenarios.”
U.S. Sen. Sherrod Brown, D-Ohio, spent much of last week lobbying for the passage of an immediate bailout of the auto industry with a $25 billion short-term bridge loan from the $700 billion already approved to help fix America’s economy.
Brown said that earlier last week he attended a senate banking committee hearing where chief executive officers for GM, Chrysler and Ford, as well as government officials and union leaders, said that if assistance is not given to these companies, the nation’s economy will continue to suffer and worsen.
“If they don’t receive assistance, auto suppliers, auto dealers, related industries in every state will soon feel the impact. This industry is woven into the fabric of our economy every bit as much as Lehman Brothers or AIG or the three banks that testified to the committee last week. Every one of these three banks received $25 billion under the Emergency Economic Stabilization Act. … If it makes sense to give one bank $25 billion, we can certainly invest the same amount to save the entire domestic auto industry,” Brown said in a telephone press conference last week.
Even though most parts manufacturers produce pieces for different makers, the contracts with individual makers are so great that the loss of revenue from just one would be devastating to suppliers, Wilkerson said.
TRW, for example, supplies parts to a diversified customer base but 22 percent of their North American sales comes from the Big Three. Here in Mount Vernon, that percentage increases greatly.
“This is typical across our TRW plants; some others supply to Toyota and Honda. Mount Vernon is very heavily into the Big Three but we’re still keeping people making parts,” Wilkerson said.
Brown’s concerns regarding possible bankruptcy for any of the auto manufacturers is threefold. First, he said a bankruptcy court could throw out any union contracts leaving employees out in the cold regardless of any promises made by the company.
“These are promises made to workers about their health care, about their retirement and all of the sudden we’re going to let them take that away? That’s not the American way,” Brown said.
Secondly, if one or all makers go into Chapter 11, Brown is convinced that the American people simply won’t buy their products.
“When you buy a car you want to know that company is going to be in business in the years and months ahead so that it can provide service and you can buy parts, all those things that are available,” he said.
Finally, Brown worries about the disruption to suppliers and how they would survive.
As an example of how suppliers work hand-in-hand with the automakers is the continuity of production schedules.
It’s possible, Wilkerson said, that the traditional holiday shutdown between Christmas and New Year’s could be extended.
“It’s very typical in the auto industry that between Christmas and New Year’s, and surrounding weekends, to be shutdown,” Wilkerson said. This shutdown for suppliers coincides with shutdowns at the manufacturing facilities. With the bailout up in the air, Wilkerson expects those shutdowns could be extended up to as much as three weeks.
“There is that possibility of an extended shutdown for our customers,” he said. “If it goes out two or three weeks, we would follow.”
Wilkerson did confirm that employees are paid for a normal shutdown period but was unsure what would happen during an extended period. The determining factor could be with a union contract.
“Any opportunity for the company to go unpaid (during an extension), they would, but it could be the union contract that has specifics for that,” he said.
The Congressional hiatus of the bailout is not the only thing holding the auto industry back. Wilkerson believes that until lenders start to thaw current lending practices, it won’t matter how much money is in the bailout coffers.
No other industry has been hit as hard by high gas prices, the credit crunch or the recession as the auto industry has, Brown said.
“Until credit gets thawed it is going to be tough to sell cars. It’s just the domino effect in play,” he said. “Nobody foresaw how deep the downturn would be. Subprime lending was the catalyst and it sent shockwaves through all industries.”
TRW continues to employ 100 at the Mount Vernon facility.
Calls to Sanoh America to discuss the economy’s affect on its production facility here in Knox County were unreturned.
