Lima Auto Task Force urges support for Big Three loan

LIMA - The impending collapse of General Motors and the far-reaching implications of a bankrupted Big Three requires immediate action or the economy of Lima - and the entire Midwest - could take decades to recover, Mayor David Berger said Thursday.

Berger, chairman of the Lima Auto Task Force, made the plea for residents to support a federal loan to the Big Three as their executives spent the day in Washington pleading their case.

"It is a massive portion of the livelihood and the economy that all of us share in this area and we believe that it's vital people understand just how rooted our community is in the automotive industry and what it does," Berger said.

Berger was joined by Adrian Price, manager of the Lima Ford Engine Plant, Jed Metzger, president of the Lima-Allen County Chamber of Commerce, Bill Timmermeister, owner Lima Auto Mall, and others at The Lima News to present their case. Sean McAlinden, chief economist and vice president of research for the Center for Automotive Research, joined the conversation via phone.

McAlinden, who co-authored a study on the economic affect of a Big Three collapse, said many more jobs would be lost than the 239,341 employees directly employed nationwide by General Motors, Chrysler and Ford.

"It was fairly clear by talking to suppliers and purchasing officials and also the international automakers themselves, that the result would be the immediate bankruptcy of not just hundreds but thousands of suppliers," McAlinden said.

That, he said, could push international automakers to the brink of failure, as they would be unable to buy parts from the suppliers they share with American automakers.

McAlinden's study projects 973,969 people employed by suppliers, transportation companies and others linked to the industry would lose their jobs, plus hundreds of thousands more as revenues drop across the nation. All told, nearly 3 million Americans will lose their jobs if the Big Three collapse, he said.

Locally, the state has more than 100,000 jobs related to the auto industry, with the average worker earning $50,000 a year, said Marcel Wagner, president of Allen Economic Development Group. Additionally, the state received $1 billion in sales tax from automotive sales last year. Auto sales in the last month could be down 40 percent to 50 percent, McAlinden said.

Wagner said it's important to realize that people outside the auto industry will also suffer if a loan isn't granted.

"It ripples not just down through the automotive companies, but through the entire community," Wagner said. "I think you'll see it in charitable institutions, contributions to churches, to scouts, to all those types of things go away."

Each of the Detroit Three faces its own unique circumstances as they ask for a $34 billion federal loan.

Without $4 billion in the next two weeks, GM will likely file for bankruptcy, McAlinden said. Still, he said the long-term plan it presented to Congress is the most complete.

Ford turned a profit in this year's first quarter and was prepared for the changing marketplace, but not the credit crunch and economic downturn, Price said.

"It's important to understand that a plan wasn't invented in the last two weeks ... in Ford's case, we've been restructuring our system since 2006 under Mr. [Alan] Mulally's guidance."

Price said the company will be profitable once the economy regains its strength.

"It really is a bridge loan, not a handout, and it's based purely on the temporary situation we find ourselves in in the economy," Price said.

Price said Ford is asking for access to a loan, but doesn't expect to need it unless the economy takes longer than expected to recover. But they're also championing the loan for GM because of the fallout a GM collapse would cause.

That fallout could include the Lima Engine Plant closing, said councilman Tom Tebben, who represents an Alabama foundry that supplies engine blocks to the Lima plant. Before the blocks get to Lima, however, they receive initial machining at a plant in Kentucky. That plant also contracts with GM and Chrysler, and if GM goes under, that plant can't cover its fixed cost.

"That's just one supplier of one component, but that one component shuts Lima down," Tebben said.

Lima's plant, McAlinden said, is too great to lose.

"Your plant, the Lima Engine Plant, is the model Detroit Three powertrain plant in the entire North American system," he said.

As for Chrysler, it may not survive into 2009 regardless of what happens, McAlinden said.

Owned by a private equity firm and seeking a sale to foreign suitors, he said their circumstances aren't those that deserve a federal check, he said.

"We shouldn't loan money to Chrysler quite frankly," McAlinden said.

He did say money could possibly go toward a GM-Chrysler merger.

Whatever happens, Berger said time is running out.

"The immediacy of this need is real, it's there, and the parties who are in place have to make the decision," he said.

Berger said the community needs to write, e-mail and call Ohio's congressional delegation requesting their support.

"They need to be persuaded. They need to hear from those who are in fact in their districts how important these industries are to the lives of literally tens of thousands of employees."

Price said the companies are simply out of options.

"If we had the opportunity to go and locate the funding elsewhere, believe me, we wouldn't be in Washington right now asking for it," Price said. "We'd be doing it privately and we're very confident we've got the plans to deliver the turnaround and create a profitable company in 2011 as the economy comes back."