Why Washington Must Help Save the Auto Industry

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For close to a century, the automotive industry has been one of the engines of our American economy. It is the source of millions of blue-collar and white-collar jobs for our citizens. It supports the growth and development of thousands of small and medium-sized businesses, and helps to sustain other larger corporations in industries ranging from energy to technology. It has made and continues to make upward mobility accessible to millions of hard-working families, providing them with the resources to own homes, finance their children’s education and enjoy a comfortable retirement. Now, the industry that has been so vital to the advancement of our nation faces one of the most severe economic downturns in American history. In light of this disastrous state of affairs, it is imperative that Congress creates legislation and work with the White House to provide financial aid to this vital and irreplaceable sector of American industry. In fact, President-elect Barack Obama has already openly supported immediate emergency assistance for the industry.

As President and CEO of BLACK ENTERPRISE and a current board member of AutoZone, I know first-hand that the challenges of the auto industry is not a Detroit problem but a Main Street dilemma. For nearly four decades, our media outlets have reported on the positive impact car makers have had on providing employment opportunities and career advancement for professionals across myriad disciplines as well as expanding, developing and funding enterprises, large and small — businesses that, in turn, have generated jobs for communities throughout the country. An example of the impact of the auto industry can be found if one reviews BLACK ENTERPRISE’s annual rankings of the nation’s largest black-owned businesses, the B.E. 100s. Of the 280 corporations included on our multiple listings of industrial/service companies, auto dealerships, advertising agencies and financial services firms, 100 are auto dealers and roughly 20 industrial/service companies supply raw materials, products and services to car manufacturers. That’s not to mention the scores of black advertising agencies and financial firms that have provided services to the industry.

If the auto industry is allowed to decline further, many of these companies will be forced to close their doors, wrecking the financial future of many black-owned businesses and the livelihoods of their employees. The companies on our lists will be unable to pay or contract suppliers and will be forced to lay off workers. As a result, large numbers of smaller entities — IT firms, raw materials manufacturers, personnel services companies, law firms, accountants and other such vendors would face extinction. Moreover, hundreds of thousands of American households would be devastated. As these workers lose jobs, they will no longer have the resources to make purchases from retailers or invest in the financial markets. So you can clearly see that support of the auto industry represents one of our best hopes for the restoration of confidence in the American economy.

If the industry does not gain financial support, then the well being of millions of Americans and the entire U.S. economy will most

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  • Rhoal Tapp

    What makes you think a influx of monies will sell more automobiles in Detroit? Where’s the leadership that will change the mindset of being a followers not leaders in the industry. Maybe some one in the computer industry should lead the auto industry? What make you think they will not be back asking for more monies in 2 years? Are we saving jobs or delaying what is about to really happen in the American Auto Industry?

  • Gina

    Rhoal you are completely right. Mr. Graves is promoting the idea that a business, and ENTIRE industry can have a faulty and FAILED business plans and archaic financial structures and the tax payers should prop them up. If all of today’s automakers go away due to taking on greater liabilities than they will ever be able to service, then new companies with good business plans and good corporate governance can replace them.

    The demise of these failed businesses might present opportunities to African American entrepreneurs who can figure out a way to produce automobiles without the huge overhead that is now choking the automakers now.

    They might as well change the name of Black Enterprise to Black Dependency. horrible message to be sending to entrepreneurs. An embarrassment. Mr. Graves clearly has a conflict of interest and a financial stake in the auto industry and its advertising dollars that has clouded his judgment.

  • Pattigeorge

    Mr. Graves:

    Thanks for the terrific article. I’m sending several links regarding our request for funds to support our automotive industry:

    Bob Nardelli’s Senate/House written testimony at http://blog.chryslerllc.com/blog.do?id=537&p=entry

    Mark Phelan’s article, “6 myths about the Detroit 3,” in the Detroit Free Press at http://www.freep.com/apps/pbcs.dll/article?AID=2008811170379

    Chrysler video “Straight Talk About Assistance” at http://www.youtube.com/watch?v=uPODSNAbkOU

    I’m also including an op-ed article from W. Frank Fountain, Senior Vice President – External Affairs and Public Policy with Chrysler LLC

    Thanks. Patti, Chrysler
    Minorities Have Huge Stake in U-S.-Based Auto Industry
    As Congress debates whether to provide financial support to the U.S. auto industry, America’s ethnic minorities have a huge stake in the outcome.

    Over the decades, good-paying automotive jobs have provided a ticket into the middle class for hundreds of thousands of Americans, many of them minorities. Today, the U.S.-based automakers continue to make an enormous contribution to minority employment as well as the health of minority-owned suppliers and dealers.

    Chrysler has traditionally been one of the largest employers of African Americans in the U.S. Today, 27 percent of U.S. employees are ethnic minorities, and diversity can be found at all levels of the organization. Altogether, 25 percent of employees at the VP level and above are women and ethnic minorities. Indeed, Chrysler’s chief designer and corporate comptroller and auditor are African American.

    More than 25 years ago, we created the auto industry’s first minority business development program. In 2006, the National Minority Supplier Development Council honored Chrysler for the fourth time for its long-term commitment to providing opportunities to minority suppliers.
    Despite facing tough economic challenges in 2007,

    Chrysler spent $4.8 billion with minority suppliers – up $900 million from the year before. That represented 15.5 percent of our total purchases. Since 1983, Chrysler has sourced more than $38 billion to minority-owned suppliers.

    We’ve pioneered initiatives to build a high-quality base of minority dealers, who play an important part of their communities across the country. In 2007, Chrysler’s 184 minority dealers generated $7 billion in sales and employed more than 5,000 workers.

    As part of our commitment to diversity, we continue to reinvest in the communities where we operate – transforming aging urban plants into modern, competitive facilities, instead of abandoning them for countryside and “greenfield” plants. This reinvestment is happening almost exclusively in urban areas with large minority populations.

    The U.S. auto industry is the backbone of the nation’s economy. According to independent research, a domestic auto bankruptcy would have a devastating effect on our nation’s economy: 2.3 million to 3 million in lost jobs, $275 billion-$400 billion in lost wages, and $100 billion-$150 billion in lost government revenue. One in ten American jobs relies on the U.S. auto industry.

    This is why the three U.S. automakers are asking the federal government for assistance: to address the devastating automotive industry recession caused by our nation’s financial meltdown, and the current lack of consumer credit, which has resulted in the critical lack of liquidity within our industry.

    With credit markets frozen, our customers – average working Americans – do not have access to competitive financing to purchase or lease vehicles. Our dealers do not have access to market competitive funding to place wholesale orders for new vehicles, resulting in the constriction of cash inflows to auto manufacturers. Without the automotive infrastructure, our minority dealers will be unable to maintain their stature, influence and contributions to the community.
    Contrary to conventional wisdom, U.S.-based automakers are in the midst of reinventing themselves. Capital investment in new technologies, improved operations, and future product includes a combined $12 billion in annual spending for research and development. As an industry, we are moving full speed ahead to make the transition to advanced propulsion vehicles that will help support national energy security and environmental sustainability goals.

    Today, Chrysler has a very strong future product pipeline. Chrysler will begin producing an electric-drive model for North American consumers in 2010. And in 2009, about 100 Chrysler electric-drive vehicles will be on the road in government, utility and other development fleets.
    Government assistance will provide stimulus and will help secure the future – a bright future in which U.S.-based automakers continue to play an important role in our nation’s economy and in helping minorities continue to climb the American economic ladder.
    W. Frank Fountain
    Senior Vice President
    External Affairs and Public Policy