Auto Industry Hearing, Auto Parts

By November 19, 2008Economy

Very glad to see James S. McElya, Chairman and Chief Executive Officer, Cooper-Standard Automotive, Inc., as a witness at today’s hearing by the House Financial Services Committee on the automotive industry and merits of federal financial assistance. As Cooper-Standard describes itself:

Cooper-Standard Automotive Inc., headquartered in Novi, Mich., is a leading global automotive supplier specializing in the manufacture and marketing of systems and components for the automotive industry. Products include body sealing systems, fluid handling systems, and NVH control systems. Cooper-Standard Automotive Inc. employs more than 19,000 people with more than 70 facilities throughout the world.

Nineteen thousand employees…

The critical importance of the automotive parts manufacturers (systems, components, equipments, etc.) needs a full airing in the public debate over the domestic auto industry. It’s not just the vitality of the Big Three and their value that’s at stake.

USA Today on Tuesday had the best single story we’ve seen on the auto industry’s current troubles and the connection to the parts, “Automakers say if they go, millions of jobs will vanish.”

Key point:

Moody’s chief economist Mark Zandi estimates that 2.6 million jobs — about 1.9% of the U.S. workforce — would be lost if GM, Chrysler and Ford were to go under.

That includes more than 255,000 people directly tied to the three companies and an additional 2.3 million whose jobs are indirectly dependent — everything from people who work in the steel, glass, fabric, tire and electronic industries to the barista who makes $4 cappuccinos for the ad executive who’ll be out of work when his auto industry business ceases to exist.

Zandi argues the economy is too weak to absorb the fallout from an auto industry crisis.

“We are in a very fragile state. This could be the thing to push us over,” he says. “The ripple effect is like throwing a big boulder into the economic pond.”

The foreign-owned automotive manufacturers who make vehicles in the United States do not rely on their own autonomous supplier-network either. A company that makes gaskets for Ford and GM may also make them for Toyota or Mercedes.

Suppliers in the past tended to focus on one customer, but now almost all have overlapping customer bases. That’s why Toyota worries about the Big Three. About 75% of Toyota’s suppliers here are North American firms that also make parts for Detroit.

“We are concerned with the industry in general, but we’re mostly concerned about our suppliers,” Toyota spokesman Mike Goss says. “If the worst happens in Detroit and these companies suffer, we’re worried about their longevity as well.”

The trade association for the parts industry is MEMA, the Motor & Equipment Manufacturers Association, which has been very active in recent discussions about federal financial aid for the domestic auto manufacturers. Here’s the latest news from their end, “Nearly 100 Supplier CEOS Send Letter to House and Senate Urging Economic Relief“:

“The vehicle manufacturers and the supplier industry are interwoven,” said Bob McKenna, president and CEO of the Motor & Equipment Manufacturers Association.  “Addressing the current financial challenges the automotive industry faces is not a bailout, but will help provide a framework and structure for protecting these valuable domestic manufacturing jobs.” 
According to recent studies, motor vehicle suppliers are the nation’s largest manufacturing sector and provide 70 percent of the content of U.S.-built cars and trucks. Suppliers manufacture the parts and technology used in the production of more than 11 million new cars and trucks produced each year, and the aftermarket products necessary to repair and maintain more than 247 million vehicles on the road today.

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