Yesterday’s extraordinary summit in Detroit was one more strong indication that last Tuesday’s terrorist attacks on the World Trade Centre and the Pentagon will have a far-reaching economic impact in the United States, writes Marty Padgett.
On Wednesday, the leaders of General Motors, Ford and DaimlerChrysler‘s Chrysler Group along with United Auto Workers President Stephen Yokich met with a phalanx of US Cabinet secretaries at GM’s Cadillac plant in Hamtramck, Michigan, to discuss the impact of the September 11 attacks on the U.S. auto industry.
The visit by Labour Secretary Elaine Chao and Commerce Secretary Don Evans gave these automakers a chance to counter “a direct attack against America’s economic might,” as Chao termed the terrorist acts.
But whereas the airline industry is seeking a direct bailout of $US15 billion from the government to counter huge losses partly related to the acts, the automakers seemed more intent on reassuring consumers that the US economy was strong – and that buying a new car would be one way of demonstrating faith in the country.
Quietly, it may also have been an opportunity for the automakers to lobby for
some sort of credit relief. Ford Chairman William Ford noted that he and the
other leaders are concerned about borrowing costs, which may rise in the wake
of a credit rating warning last Tuesday by Standard & Poors. (See https://www.just-auto.com/news_detail.asp?art=33937.)
The domestic automakers have already been forced to extreme measures to counter the effect of the attacks, which killed an estimated 6,000 people in New York, 190 in Washington and 64 in Pennsylvania, where a hijacked plane was presumed forced down by passengers aware of the terrorists’ plans.
Thus far, all the automakers have been affected by slow crossings at the US-Canada and US-Mexico borders, which is disrupting plants that work on just-in-time inventories.
The trickle-down effect on the sales end seems to be immediate. JD Power reported last week that in the days immediately following the attack, sales dropped some 35 percent. Ford, which sources many parts and builds many vehicles in Ontario, Canada, has already announced production cuts of some 120,000 units for the fourth quarter. And GM has already announced a new round of incentives and low-rate financing, called “Keep America Rolling,” (see https://www.just-auto.com/news_detail.asp?art=34021) to counter what it expects will be an abysmal sales month.
The Big Three have already been suffering steep declines in sales and market share for much of the summer, with Ford and the Chrysler Group particularly hard-hit. And after record-setting sales years prior, analysts have continually revised their estimates for the US market downward.
J Ferron of PricewaterhouseCoopers puts this year’s volume at 15.8 million units, as much as 700,000 units below estimates at the beginning of the year.