Auto bailout failure highlights a regional carmaking split

McClatchy NewspapersDecember 11, 2008 

WASHINGTON — The Senate's rejection of a bailout for U.S. auto companies will heavily affect the South, which experienced an economic rebirth through a symbiotic relationship with foreign automakers and domestic auto suppliers.

It's that relationship that's prompted representatives from such companies as Toyota, which has an assembly plant in Senate Minority Leader Mitch McConnell's home state of Kentucky and planned facilities in Mississippi, to urge a bailout for their domestic competitors.

"I've talked to several Toyota executives and they are very concerned," said David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich. "The supply base is so tightly woven that you can't separate them at all. Failure would have a devastating impact on all regions but particularly the Midwest and South. Because of the tightly knit web of suppliers, a failure of a GM or Ford would take the supply base down for a considerable time and create an economic tsunami."

Yet McConnell and members of Congress from Southern states that are home to foreign automakers emerged as some of the staunchest opponents of the Democratic- and White House-backed plan, which was approved Wednesday night by the House of Representatives on a vote of 237 to 170, but defeated in the Senate Thursday on a procedural vote, 52 to 35.

The South is home to a network of suppliers spread across such towns as Danville and Georgetown, Ky., and throughout Alabama, Mississippi, Tennessee and Georgia.

In central Kentucky alone there have been eight major layoffs at suppliers, at least one filed for bankruptcy, and groups that assist laid-off employees have helped nearly 550 workers. Kentucky has two Ford plants in Louisville, a Toyota factory in Georgetown and a GM plant in Bowling Green. The state trails only Michigan and Ohio in the number of autos produced.

Publicly, Toyota, Nissan, Honda and other overseas-based auto companies have tried to stay out of the current fray.

For years, Southern lawmakers offered lucrative tax subsidy packages to foreign automotive companies in return for building facilities in the region and hiring local workers. The South's lower wages and weaker support for unions were also a draw. Republican opposition to labor unions was at the crux of ongoing opposition to the bailout.

"They have such disdain for organized labor and that seems to be trumping everything," Cole said. "They're cutting off their nose to spite their face."

Sen. Richard Shelby of Alabama, the senior Republican on the Banking Committee and another vocal critic of the auto bailout, represents a state that offered choice tax subsidies to attract Honda, Hyundai and Mercedes-Benz. Sen. Lindsey Graham, R-S.C, whose state is home to a BMW plant, has said the Big Three will inevitably fail.

Like Alabama and Mississippi, Georgia also has benefited from hosting foreign automakers. The state is eagerly awaiting the arrival of a proposed $1.2 billion Kia manufacturing plant, which will be located north of Columbus near the Georgia-Alabama border.

In recent years, GM closed a factory near Atlanta.

Even as many Southern Republican lawmakers held firm, arguing that taxpayers shouldn't subsidize failure, experts said that if Chrysler, Ford and General Motors do fail, a number of auto suppliers and even several foreign auto companies will be pulled down by the undertow.

In the meantime, the infighting over the proposed bailout took on a decidedly regional tone, with lawmakers from the Midwest and Northeast expressing frustration with their Southern counterparts.

Others just want a resolution.

"We have to consider the diverse and complicated landscape of the auto industry," said Rep. David Dreier, R-Calif. "The question of what is an American car used to be a very simple one. That's no longer the case."

"Which is more American — the Ford built in Mexico or the BMW built in South Carolina?" Dreier asked. "What about the Chevy built with Japanese parts and assembled in Canada? How do we pick and choose winners in a diverse industry that involves foreign investment, American workers and a global supply chain? Is the Toyota plant worker in Kentucky less valuable to the U.S. economy than the Ford worker in Detroit?"

(David Lightman in Washington and Scott Sloan of the Lexington Herald-Leader contributed to this article.)

MORE FROM MCCLATCHY

GOP Senate leader opposes auto bailout, may kill bill

Senate probe blames top Bush officials for detainee abuses

With oil in retreat, Iran's good times are almost over

Obama denies knowledge of Blagojevich's scheme

McClatchy Newspapers 2008

McClatchy Washington Bureau is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service