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Bailout not just a Detroit problem
By Blake Spurney Editor
The seemingly constant coverage about whether Detroit automakers will receive a government loan has far wider ramifications in Rabun County than what many people might realize.
"It will certainly have a trickle-down effect to even the smallest communities because one in 10 jobs in the United States is directly related to the automobile industry, and some say one in eight," said Jeff Duvall, whose dealership sells new General Motors, Chrysler and Ford products.
If GM goes under, many suppliers will follow suit.
Duvall said 200 tier one suppliers served all manufacturers in the United States. Then there are the tier two suppliers that supply tier one suppliers, and the tier three suppliers that support tier two.
Mountain City Screw Products Inc., makes parts that are sold to a supplier, and a company in Clarkesville makes heating band switches that are part of the supply chain.
Honda and Toyota have lobbied for the federal government to help out the Detroit automakers because all auto plants likely would be forced to shut down if one or more folded.
"It'll be like the steel industry," Duvall said. "It'll be gone."
Another connection is the sizable number of Rabun residents who retired on a United Auto Workers pension plan. Hoyt Speed is one of those who moved back here upon retiring from GM. He said many Rabunites who moved to Michigan decades ago still lived there.
Speed, 76, said GM already has reduced some of his health benefits. If the former symbol of American industrial might goes under, he figured all of his benefits would go with it.
"I guess we'll have to wait and see how it plays out," he said.
Speed went to Detroit in 1952 so he could make $1.80 an hour as a union employee. The best job he could find in Rabun County was cutting wood with a crosscut saw for 55 cents an hour in Apple Valley. He left his job in 1982 making $28 an hour. However, he acknowledged that GM probably wouldn't be in such poor shape if not for the unions.
Many other residents have a vested interest in the automakers surviving because of their vehicle's warranties.
Duvall said the difference between the automakers and other service industries was that a vehicle is the second largest purchase most people make. Therefore, consumers are going to live with their car for a long time, and they will need service and parts for it.
Duvall said the big unknown for his business and consumers would be if one or more automaker went bankrupt. Vehicles have longer warranties than in the past, and that means they have to return to dealers longer. How customers would get parts replaced in the event of a bankruptcy is anyone's guess.
"That's what concerns me more than anything," he said. "We're going to take care of our customers as long as we possibly can."
Dealers also are in a predicament. Besides the sluggish economy that affects sales, dealers could be on the hook for rebates if an automaker goes bust. GM has suspended paying its rebates, which can add up to a lot of money. Duvall said a friend of his at a smaller dealership was owed $180,000.
Rebates save the consumer money, but the dealer has to pay the full price for a vehicle. So when a manufacturer is offering a $5,000 rebate, that savings is passed onto the consumer through the dealership. If an automaker goes bankrupt, a dealer who is owed money for rebates becomes an unsecured creditor. All three Detroit manufactures are offering rebates now.
Duvall said all indications pointed to President George W. Bush stepping in to provide the loan needed to keep GM and Chrysler operating in the short term. He also expressed hope that a change in the White House will offer some relief.
"He will fix it so at least they don't go broke for a while," he said about President-elect Barack Obama.
Speed said everybody should be concerned about the fate of the automakers and their employees.
"You care for your fellow man the same way they care for you and basically their families too," he said.
"It will certainly have a trickle-down effect to even the smallest communities because one in 10 jobs in the United States is directly related to the automobile industry, and some say one in eight," said Jeff Duvall, whose dealership sells new General Motors, Chrysler and Ford products.
If GM goes under, many suppliers will follow suit.
Duvall said 200 tier one suppliers served all manufacturers in the United States. Then there are the tier two suppliers that supply tier one suppliers, and the tier three suppliers that support tier two.
Mountain City Screw Products Inc., makes parts that are sold to a supplier, and a company in Clarkesville makes heating band switches that are part of the supply chain.
Honda and Toyota have lobbied for the federal government to help out the Detroit automakers because all auto plants likely would be forced to shut down if one or more folded.
"It'll be like the steel industry," Duvall said. "It'll be gone."
Another connection is the sizable number of Rabun residents who retired on a United Auto Workers pension plan. Hoyt Speed is one of those who moved back here upon retiring from GM. He said many Rabunites who moved to Michigan decades ago still lived there.
Speed, 76, said GM already has reduced some of his health benefits. If the former symbol of American industrial might goes under, he figured all of his benefits would go with it.
"I guess we'll have to wait and see how it plays out," he said.
Speed went to Detroit in 1952 so he could make $1.80 an hour as a union employee. The best job he could find in Rabun County was cutting wood with a crosscut saw for 55 cents an hour in Apple Valley. He left his job in 1982 making $28 an hour. However, he acknowledged that GM probably wouldn't be in such poor shape if not for the unions.
Many other residents have a vested interest in the automakers surviving because of their vehicle's warranties.
Duvall said the difference between the automakers and other service industries was that a vehicle is the second largest purchase most people make. Therefore, consumers are going to live with their car for a long time, and they will need service and parts for it.
Duvall said the big unknown for his business and consumers would be if one or more automaker went bankrupt. Vehicles have longer warranties than in the past, and that means they have to return to dealers longer. How customers would get parts replaced in the event of a bankruptcy is anyone's guess.
"That's what concerns me more than anything," he said. "We're going to take care of our customers as long as we possibly can."
Dealers also are in a predicament. Besides the sluggish economy that affects sales, dealers could be on the hook for rebates if an automaker goes bust. GM has suspended paying its rebates, which can add up to a lot of money. Duvall said a friend of his at a smaller dealership was owed $180,000.
Rebates save the consumer money, but the dealer has to pay the full price for a vehicle. So when a manufacturer is offering a $5,000 rebate, that savings is passed onto the consumer through the dealership. If an automaker goes bankrupt, a dealer who is owed money for rebates becomes an unsecured creditor. All three Detroit manufactures are offering rebates now.
Duvall said all indications pointed to President George W. Bush stepping in to provide the loan needed to keep GM and Chrysler operating in the short term. He also expressed hope that a change in the White House will offer some relief.
"He will fix it so at least they don't go broke for a while," he said about President-elect Barack Obama.
Speed said everybody should be concerned about the fate of the automakers and their employees.
"You care for your fellow man the same way they care for you and basically their families too," he said.
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