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Published: December 02, 2008 05:20 am    PrintThis  

Fate of Detroit's Big 3 will trickle down locally

By Bill Kirk
Staff Writer

1As the CEOs of the Big 3 automakers — Chrysler, Ford and GM — submit stabilization plans for a $25 billion bailout to submit to Congress today, which will be scrutinized at a Senate hearing tomorrow and a House hearing on Friday, many smaller parts suppliers and dozens of car dealers in the region are watching with great interest since their livelihoods depend on what happens.

Meanwhile, Detriot's problems, combined with the economy, are proving to be somewhat of a boon for local auto repair shops, such as Family Car Care on Pond Street in Gloucester.

"We are hearing a lot of 'I'll fix the car' instead of 'I'm buying a new one,'" said Paul Paone, the shop's service manager. "We're not seeing problems like the dealerships are."

"It's good for us; we're the last resort before people have to go to a dealer for a new car," Paone said. "People are saying a repair bill is better than a car payment."

General Motors Corp. and Chrysler LLC say they have burned through a combined $34.6 billion of cash in the first nine months of this year, as U.S. auto sales have plummeted to the lowest level in more than 25 years.

GM said its sales last month, if adjusted for population growth, were the worst since World War II.

"The ripple effect would be devastating — two to three million jobs would be lost if GM went under," said Tom Barenboim, president of Clark Chrysler, Jeep and Dodge of Methuen. "I'm competition for GM, and the last thing I want is for them to go under. I don't think anyone wants them to go under."

The reason, said Barenboim and other industry experts, is that GM, which is the largest carmaker in the world, has such broad reach into the national and global economy that if it suffers, so do parts makers and other small and large manufacturers that sell their products to car makers.

Detroit's car makers employ nearly a quarter-million workers, and more than 730,000 other workers produce materials and parts that go into cars. If just one of the automakers declared bankruptcy, some estimates put U.S. job losses next year as high as 2.5 million.

"If they pulled the plug on GM, the impact would be severe," said Jerry Garfield, owner of Jaybird and Mais, a Lawrence company that makes the cloth used by some car companies for convertible roofs.

While Garfield's company has diversified into products unrelated to the car industry, and sells most of his products to Toyota and Mitsubishi, he agreed that the ripple effect from the failure of any one of the Big 3, but particularly GM, would be felt everywhere.

"Someone just selling GM products, he's got a problem," Garfield said.

But he stopped short of fully supporting a cash infusion for domestic car companies.

"The Big 3 need to reorganize and not get a bailout," he said. "Let them go Chapter 11."

Another local supplier agreed — to a point.

Paul DiMaggio, president and CEO of Delaware Valley Corp. of Lawrence, which manufactures the cloth used on seats, door panels and trunks of many vehicles, said he's been dealing with the domestic car company executives for years, and it's been rough.

"I'm ambivalent about the bailout for a couple of reasons," said DiMaggio, whose father, Boston Red Sox great Dom DiMaggio, started the company in 1953. "After 30 years of dealing with Detroit, I don't think I've ever run into an industry run by a bigger bunch of knuckleheads."

He said their executives are "arrogant; they don't listen, and nobody's in one position long enough to learn their job. It's the epitome of a bureaucracy. They're just too big."

While bankruptcy would help "clean the slate," he understands the reluctance by Congress to let the companies go under.

"There are a ton of companies out there that aren't going to make it if GM, Ford or Chrysler files Chapter 11 and they don't pay their bills," he said. "I've looked at our position, and we'll survive. But for most suppliers who are 100 percent committed to domestic automotive, they're going to tank ... and that will put a lot of people out of business."

If lawmakers like what they see, Congress may reconvene the following week to consider the auto bailout.

In New Hampshire, about 7,000 workers were involved in the production of automobile parts in the second quarter of this year, including Hitchiner Manufacturing in Milford, according to The Associated Press. The company depends on the auto industry for about half its sales. It has weathered the economic slump through attrition.

In Dover, sales have fallen 40 percent at Park Name Plate, which produces badges and medallions. Park Name Plate manufactures the logo for the Ford Explorer's wheel cap and the emblem in the middle of its steering wheel. In the past year, the company's workforce has decreased from 160 employees to 100.

Already, times are difficult in the car industry, said Neil Decoker, president and CEO of Original Equipment Suppliers Association, a trade group that represents 410 of the largest auto parts suppliers in the country.

"There will be at least 1 million fewer vehicles built next year than this year," he said. "It's a pretty tough time."

Garfield agreed, noting that the slowdown in the car industry has all but eliminated orders from his clients.

His company ordinarily ships hundreds of tons of cloth, backed by a rubber membrane, to plants throughout the United States for use on convertibles made by Toyota and Mitsubishi.

Now, those rolls of fabric and rubber are sitting in his plant at 350 Merrimack St. in Lawrence. He doesn't expect to deliver anything until April 2009, and that's only if the economy starts to come back.

As a second tier supplier, he sells to first- tier companies, which sell directly to the automakers.

"They have shut down operations until the end of the year," he said of the first tier manufacturers. "They are trying to deplete their inventory. They sent us projections saying that in April they might order more. But nobody really knows."

Staff writer Andrea Holbrook contributed to this story by staff writer Bill Kirk, who may be contacted at bkirk@gloucestertimes.com.

In New Hampshire, about 7,000 workers were involved in the production of automobile parts in the second quarter of this year, including Hitchiner Manufacturing in Milford, according to The Associated Press. The company depends on the auto industry for about half its sales. It has weathered the economic slump through attrition.

In Dover, sales have fallen 40 percent at Park Name Plate, which produces badges and medallions. Park Name Plate manufactures the logo for the Ford Explorer's wheel cap and the emblem in the middle of its steering wheel. In the past year, the company's workforce has decreased from 160 employees to 100.

Already, times are difficult in the car industry, said Neil Decoker, president and CEO of Original Equipment Suppliers Association, a trade group that represents 410 of the largest auto parts suppliers in the country.

"There will be at least 1 million fewer vehicles built next year than this year," he said. "It's a pretty tough time."

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Tim Jean/Gloucester Daily Times Jerry Garfield, owner of Jaybird and Mais, looks over rolls of finish automotive materal his company makes in a mill in Lawrence. Tim Jean/Staff Photographer (Click for larger image)

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