Wednesday, November 19, 2008

Local jobs threatened by auto industry woes

November 15, 2008 - 11:46 PM
Sean Gaffney
The Monitor, McAllen, Texas

The crumbling of the U.S. auto industry is threatening hundreds of jobs in the border region as lawmakers ponder rescuing Detroit's Big Three.
Thousands of jobs - from laborers at maquiladoras that produce car parts to the sales reps and mechanics at the area's dealerships - are tied to the industry, reflecting just how deeply enmeshed U.S. automakers are in the nation's workforce.

Sales have dropped at area dealerships, and hundreds of workers in the Rio Grande Valley have lost jobs as the economic crisis and waning demand for domestic vehicles has brought U.S. automakers to their knees. While once unthinkable, many in the industry are watching aghast as the sun sets on Michigan.

"I never thought I would see this in my lifetime," said Bob Vackar, owner of Bert Ogden dealerships, the area's largest domestic car seller. "It's unimaginable, it really is."

Vackar has shed close to 100 positions at his dealerships already this year by not replacing workers who have left as his sales have fallen close to 40 percent - a decline almost entirely attributed to domestic cars.

Sales of U.S. autos declined when gas prices spiked earlier this year and have continued falling, but foreign and luxury car sales have risen, partly offsetting the 50 percent loss in domestic car sales, he said. Still, Vackar has recently expanded his dealerships with new locations in Edinburg.
"Nissan is doing well. BMW is doing well. Everything else is real sluggish," Vackar said. "(General Motors) has slowed down quite a bit."

So far, at least 316 people in the Valley have lost their jobs as a clear result of slumping U.S. auto sales. Two automotive plastics suppliers, Fortis Plastics LLC and Progressive Molded Products Inc., announced they were shutting down Valley plants this year and more closures could follow.
Close to 30 percent of maquiladoras across the Rio Grande produce parts for some segment of the auto industry. About 15 percent of those factories are solely automotive suppliers, said Keith Patridge, president of the McAllen Economic Development Corp.

"What impacts us more than anything is if the automotive market is down like it is now," Patridge said. "That definitely has an impact, particularly for those that are exclusive or almost exclusively automotive suppliers."
But not all of those maquilas manufacture parts for the Big Three. Many are suppliers for foreign manufacturers, so if the U.S. firms failed, it's not clear how many jobs could be lost, Patridge said.

Mexico also stopped keeping separate data on maquila employment in 2007, making the impact of the auto market downturn on the maquilas difficult to gauge.

Of those maquilas that produce auto parts, 15 percent also make a diverse array of products for other industries, which could cushion the blow of a loss in sales to U.S. car makers, Patridge said.

"I don't think ‘scared' is the right word," he said. "What we're looking at is what the impact is to our local supply base here as far as volume."

For Dan Ramirez, owner of the Ramirez Family dealerships, his biggest problem has been the credit crisis.

"You've got customers that come in, wealthy, very good credit, and yet for whatever reason, the banks will come back and say they're not (financing.)"
Still, the lots that are focused on expensive luxury cars drove sales in October to record highs, he said. It's still easier for the rich to find financing.

His sales of domestic and non-luxury cars are down, however. And like most in the local car industry, he's not surprised by what's happened.
"You could almost see the writing on the wall," Ramirez said, "because of the inability of the Big Three to compete internationally."

Other dealers said they, too, had prepared for the inevitable. Vackar, the Bert Ogden owner, said he began reducing his inventory earlier this year, prepping for a downturn in sales of domestic autos.

As General Motors Corp. considers bankruptcy and Chrysler LLC and Ford Motor Co. burn through millions of dollars in cash each month, lawmakers in Washington, D.C., are weighing another bailout package to save the ailing U.S. auto industry.

If the Big Three collapse, nearly 3 million U.S. jobs could be lost, according to the Center for Automotive Research, a nonprofit group based in Ann Arbor, Mich., that tracks trends and changes in the auto industry.

It's unclear if the proposed bailout resolution has enough support in the lame-duck Congress to pass, and it's also not entirely certain the Big Three would fail without such a rescue.

Senate Majority Leader Harry Reid, D-Nev., plans a vote on the package this week, but it hasn't been scheduled yet. Persuading more than a dozen Senate Republicans to support the measure is the key to passing the bill.
Republicans and President George W. Bush have indicated they are reluctant to support the measure, saying Congress should expedite the release of $25 billion in loans to the auto industry approved earlier this year for the development of fuel-efficient vehicles.

Sen. John Cornyn, R-Texas, criticized Senate Democrats on Friday, saying the measure would be just the latest example of poorly conceived spending that is swelling the budget deficit.

"This is bad public policy and an affront to taxpayers who are demanding fiscal responsibility," he said in a statement.

U.S. Reps. Henry Cuellar, D-Laredo, Solomon Ortiz, D-Corpus Christi, and Rubén Hinojosa, D-Mercedes, declined to comment for this article or did not return calls seeking comment.

Sean Gaffney covers business, the economy and general assignments for The Monitor. He can be reached at (956) 683-4434.

No comments: