Friday, December 5, 2008

Auto Industry - Investment Crucial


(Atlanta, GA- November 24, 2008) A vibrant U.S. auto manufacturing industry is vital to the nation’s (and the world’s) economic security. Given the grilling that members of Congress gave industry heads last week, it is understandable that many Americans are asking themselves, “Why?”
Among other reasons:
1. one of out ten jobs in the U.S. is tied to the auto industry
2. auto manufacturing is the backbone of domestic manufacturing
3. more than 1000 parts are needed to build an auto – if domestic manufacturing tanks, so do those suppliers, from tires to windshields, to computer systems
4. the quality of Big Three autos is much better than their reputation – reliability has vastly improved from the 1980’s and 1990’s
5. the auto industry is part of the real – not financial- economy, where most economists believe that the real solutions to the economic mess will be found
6. trouble in the auto industry is now spreading to the “transplants”, or foreign-based manufacturers
7. faced with a global threat of terror, the U.S. should not surrender its vehicle manufacturing capacity entirely to foreign entities
8. the auto industry is “too big to fail”

So far, we have only bankruptcy and government bailout have been offered as solutions to the problems facing the auto industry. After week-end rescues of AIG and Citigroup, Americans rightfully feel “bailout fatigue.” Neither bankruptcy, nor government bailout are optimal.
After much thought and consideration, we have a better plan. There are private partners who can and should intervene to reinvest in one of America’s most important industries. We call on the Treasury Department, the FDIC, the FTC and the Departments of Commerce and Labor to negotiate a plan for the multi-national oil companies to support and invest in the domestic auto industry. This makes sense for a number of reasons, including:

1. During quarter ending September 30, 2008, the oil companies made record profits. For example, BP and Exxon Mobil earned about $25 billion during that period. They have the financial strength to invest in auto manufacturing

2. Oil company investments in domestic auto production is fair - no industry has benefited more from Detroit’s stubborn insistence on opposing improved gas mileage

3. To protect their investment, oil companies would finally have real incentives to move beyond gas-powered vehicles to electricity, hydrogen and other alternatives

4. Investing in auto manufacturing gives the oil companies real incentives to move beyond oil to electric and hydrogen-powered vehicles
We are convinced that this plan can work, with government assistance, but without federal/taxpayer dollars. A number of strategies are possible, including:
1. purchase of auto company stock by oil producers and refiners
2. oil industry guarantees of auto manufacturer debt
3. joint ventures to promote new technology, such as electric car batteries
4. oil company purchases of auto manufacturers
5. oil company purchases of troubled dealer franchises
6. creation of an industry-wide equity investment fund
7. save domestic auto production bonds, underwritten by oil interests

These strategies probably don’t require legislation, although they may require easing competition rules. We believe this plan is better than either bankruptcy or government bailout because it is cheaper and more effective.

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