A vital domestic industry is at risk. Given crisis conditions in the capital markets, the domestic car and light-truck manufacturers and auto finance companies face rapidly evaporating operational liquidity and soon may be unable to operate as going concerns.
The failure of one or more of the Detroit 3 and their component suppliers would eliminate as many as 5 million jobs, with ripple effects across the country. Congress and the Bush administration need to do what it takes to get the Detroit 3 through this crisis so that they can restructure and build the cars and trucks of the future, including hybrids, flex-fuel and other green vehicles.
Last year, after more than 30 years of saying no, automobile manufacturers worked with Congress to agree on legislation that would require them to produce substantially more fuel-efficient vehicles. By the 2020 model year, they must meet a combined target of 35 mpg for their fleet of cars and light trucks. That will be a huge challenge, but the companies agreed to meet it.
Now, just as they are beginning to develop the vehicles to meet this challenge, they have been hit with the greatest financial crisis our country has faced since the Great Depression. Whatever mistakes they have made in the past, they are not to blame for this calamity.
The domestic automotive industry represents almost 4 percent of U.S. gross domestic product and represents 10 percent of U.S. industrial production by value. Ordinary Americans across the country would feel the effects of a meltdown in this industry. The pain will be felt throughout the country, from the porter at the local car dealership to the waitress at the local diner to the teacher at the community college to the clerk at the hardware store on Main Street. They all depend on a healthy auto industry.
The failure of one or more of the Detroit 3 would put at risk the pensions of millions of retirees, triggering tens of billions of dollars in additional pension obligations for the federal government. It would wipe out auto dealers who have been in business for decades providing local support in their communities. Moreover, it would have severe and debilitating ramifications for the industrial base of the United States, would undermine our nations ability to respond to military challenges and would threaten our national security.
So, the challenge is twofold: to get enough money to the manufacturers to help them survive to invest for the future and to get money to finance companies so that they can continue to lend it in a market out of reach to ordinary consumers.
President-elect Barack Obama has challenged the industry to produce 1 million hybrids by 2015. Congress has the chance in the lame-duck session to enact legislation to ensure that existing financial resources can be used to support manufacturers and auto finance companies. Lets get the industry back on its feet so that it can help meet that challenge and move our country toward a more sustainable future.