Auto industry needs assistance

Government assistance for the auto industry. It’s a hot and divisive topic.

With each passing day, the uncertainty of the future of the Big Three grows. But without some sort of bailout, what will happen to not just the manufacturers and dealerships, but other industries that rely upon car sales?

One owner of a Sandpoint auto dealership says the prospect of the car industry not receiving any monetary assistance is a frightening prospect – not just for auto manufacturers but the country as a whole.

“It’s a trickle-down effect that can’t happen,” said Jeff Rokstad, owner of Rokstad Ford Mercury in Sandpoint. “It’s not just Ford, General Motors and Chrysler, it’s everything associated with it from the banks that finance the car loans to the supplier of parts to the charities who rely upon the support of local businesses.”

Rokstad said the government should provide some sort of financial assistance to the Big Three auto companies and in return the manufacturers should provide a plan on just how they will pay back the money.

The money, added Rokstad, should be used by the auto manufacturers to continue work on corporate average fuel economy standards for improving the fuel mileage on all cars and trucks, producing a more desirable product for the consumer resulting in increased sales.

“The nation in good times could sell 17 million new cars,” said Rokstad. “Analysts have forecasted the auto industry will sell about 12.5 to 13 million new cars in 2009.”

Greg Taylor, owner of Taylor-Parker Motor Co. in Sandpoint, and Kathy Sims of Coeur d’Alene Honda returned last week from Washington D.C., where along with Trent Wright the former vice president of the Idaho Auto Dealers Association met with the Idaho congressional delegation.

“Kathy and I are on the Board of Directors for the National Auto Dealers Association,” said Taylor. “There were approximately 150 (nationwide) of us that went to D.C. to discuss this issue with our congressional delegations, all with the same purpose of hopefully getting some type of bridge loan package approved.”

Taylor, Sims and Wright met with Idaho Congressman Mike Simpson and Senator Mike Crapo while in the nation’s capital. They had lengthy discussions with both as to what they felt the assistance should look like.

“Part of our responsibilities as NADA directors is to provide elected officials with as much pertinent information concerning our industry as possible,” said Taylor. Ultimately, though, both Crapo and Simpson voted against the Auto Industry Financing and Restructuring Act.

“Like many Idahoans, I am very concerned about the sharp increase in unemployment that we’ve experienced in recent weeks,” Simpson said. “To help auto workers and their families, as well as those employed by companies that support the auto industry, the Big Three must become competitive again. But this bill does nothing to guarantee that the necessary restructuring will occur. Instead, it essentially nationalizes these private companies. This is a move I cannot support.”

It’s clearly a difficult situation for which there is not a simple solution.

“Everyone is searching for a possible approach that will work to thaw the credit markets, which is a critical part of the whole economic recovery efforts,” said Taylor. “The current $14 billion request would be adequate, but only if a strong economic stimulus package is included at the outset of the new administration. Unless credit markets thaw and a degree of consumer confidence is restored, the auto industry along with many more parts of the national economy will suffer catastrophic damage.”

Like Rokstad, Taylor says the overall economic effect is beyond comprehension.

“It will put this economy in a faster and much deeper tailspin, which of course, no one can even comprehend the magnitude of,” said Taylor, who adds that tailspin could include one and possibly two of the domestic manufacturers suspending and then closing operations leaving 250,000 to 325,000 people unemployed within days.

“This would be followed by precipitating failures among component and logistic suppliers, other domestic car manufacturers, raw material suppliers, technology and service providers, dealers and their suppliers and creditors and financial institutions,” said Taylor. “It is estimated that as many as 3 million people will find themselves unemployed within a year.”

The uncertainty is upsetting for Taylor who says the auto industry has been his livelihood for 38 years.

While he knows that public sentiment is not on the side of the domestic auto manufacturers, Taylor was hopeful that by going to Washington, D.C., he and his colleagues could make an impact and ensure that Congress understood the magnitude of this issue.

“This has been an all-out effort to educate all parties involved in a very quick time frame,” said Taylor.

But it is not a handout the owners of the dealerships are looking for. They strongly believe there should be accountability on both sides.

Bill Hiatt of Riverside Auto in Bonners Ferry said his sales are down 40 percent and strongly advocates governmental assistance, but with some accountability attached.

“If the government does not step in, we are going to have a serious problem,” said Hiatt. “But the financial assistance should be sharply monitored.”

While the number of dealerships closing across the country is rising every day, what most people don’t stop to realize is that the effect goes way beyond the doors of the dealerships.

Hiatt, Taylor and Rokstad and the owners of other dealerships in North Idaho do a tremendous amount of giving back to the community in which they live. They sponsor youth sports teams, donate to local charities and provide jobs to the residents in the community.

“Local businesses support their communities with very large dollars,” said Rokstad. “They always have and always will.”

If any of these businesses are forced to close the impact would be huge. Rokstad says he cannot emphasize enough the need for people to purchase from their local merchants, especially now when the economy is struggling.

“People need to think twice before they go out of town to make a purchase,” said Rokstad, who states that by purchasing from local merchants people are not only helping keep that particular business alive but all the others who benefit from that business as well.

Hiatt agrees. “I think the key is to spend all the dollars people can in their local area. Everyone thinks they can save money going elsewhere, but that is a myth,” said Hiatt. “I don’t care whether you are buying shoes, clothing, furniture or cars. There is just as good a deal right in your backyard. Shop local for everything and we will all be okay.”

The effect of dealership closures will also be felt by those who rely upon taxpayer dollars to support state programs.

“People also need to understand the importance of the auto industry and the local dealer network to the overall strength of the economy,” said Taylor.

He cites statistics to support the fact that without a bailout the trickle down effect will be devastating.

“The average dealer has 33 employees with a payroll of $1.5 million,” said Taylor. “Auto dealers paid $2.7 million in sales and federal and state income taxes last year, and paid on average $57,660 in property taxes this year.”

He says in Idaho alone last year auto dealers’ payroll was 12.6 percent of the total retail payroll. Furthermore, the average dealer contributed $25,600 in local charitable contributions last year.

“This is what is at stake at our dealership and many others,” said Taylor.

Taking away tax dollars will in turn significantly impact unemployment benefits, social services and other programs supported by taxpayer dollars. Furthermore, it is argued that if dealerships begin to close there will be less competition which could result in higher prices.

Looking at the dire situation of the auto industry, Rokstad said there is no alternative but to provide assistance.

In an effort to make his point, Rokstad states what many people don’t know.

“When 9/11 happened, the three major car companies donated $10 million each to the relief efforts as well as several vehicles,” said Rokstad, who adds that foreign automakers sat by and did nothing.

“When a tragedy happens it is these companies that help out,” said Rokstad. “Now it’s the government’s turn to help out the auto industry.”