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Southern lawmakers sour on bailout of automakers

Southern lawmakers sour on bailout of automakers

Posted: Wednesday, November 19, 2008 9:13 pm
By: AP

  WASHINGTON (AP) — If it’s no surprise that Michigan lawmakers are behind the pitch for a $25 billion lifeline for Detroit automakers, then it might be just as predictable that Southerners would be leading the charge against it.

Southern politicians have spent years luring foreign automakers to build cars in their states, with huge success. South Carolina has BMW. Mississippi recently landed a major plant for Toyota Motor Corp. Alabama boasts plants run by Mercedes-Benz, Hyundai Motor Co. and Honda Motor Co.

In Georgia, the governor recently began using a Kia SUV in honor of the company’s planned $1.2 billion manufacturing facility there.

It’s not that Southerners are secretly wishing for the Big Three to collapse. But if those automakers were to falter, the new players are poised to ramp up production and possibly turn the South into the next Detroit.

“In the long run, having fewer competitors or weaker competitors is generally a good thing,” said Efraim Levy, a senior auto industry analyst with Standard & Poor’s. “It would contribute to a greater relative strength in the South.”

The regional divide is not black and white. Most Southern states still have a stake in the well-being of the Big Three and would suffer their own losses if the companies dramatically scaled back operations or closed their doors.

Kentucky and Tennessee have large GM plants, for example, and major auto suppliers are scattered across the region. In addition, the foreign automakers could see temporary supply disruptions in a destabilized market.

But just as U.S. consumers have increasingly turned to foreign cars, the foreign makers have made clear their preference for the union-resistant South as a U.S. manufacturing base. Increasingly, the states’ economic interests — and those of their political leaders — are realigning accordingly.

In Alabama, the number of auto industry jobs has more than doubled to nearly 50,000 since 2001, according to the Alabama Automotive Manufacturers Association. The vast majority of the positions are tied to new Honda, Hyundai and Mercedes plants. Meanwhile, Delphi Corp., GM’s former parts operation, is closing a plant outside Huntsville that once employed about 5,000 people.

In Tennessee, General Motors is planning to slow down production at its 3,500-worker plant in Spring Hill south of Nashville. Nissan Motor Co., meanwhile, has more than 6,500 employees in the state, and Volkswagen is set to break ground on a Chattanooga assembly plant that will provide about 2,000 jobs.

Southern members of Congress — as well as a handful of Southern governors — have been among the most vocal critics of a Detroit bailout. Most are Republicans, and they insist their opposition is largely about fiscal restraint and free markets: They don’t think taxpayers should be forced to rescue troubled companies and they argue that a federal bailout won’t do Detroit much good anyway.

But competitive interests are also at play.

Gov. Mark Sanford of South Carolina recently wondered whether BMW would have ever built its plant in Spartanburg if the government had been handing out money to its rivals, and Rep. Lynn Westmoreland of Georgia voiced similar concerns about the state’s Kia plant, which could bring 2,500 jobs to his rural district.

“Let’s face it, who would want to come over here and put their investment into this country if they knew the government was going to be subsidizing their competitors?” he said. “It’s just not right. It just goes against the grain of the free-enterprise system.”

Westmoreland also said it’s difficult to explain to his constituents why Congress should use public money to subsidize union wages and benefits that are far better than those in Georgia. He said the state’s well-trained, largely non-union work force is what attracts foreign companies, along with lower taxes and good weather.

Auto executives from General Motors Corp., Ford Motor Co. and Chrysler LLC insist they need a fresh $25 billion in emergency bridge loans to avert a collapse of one or more of their companies.

Democratic leaders have proposed pulling money from the $700 billion Wall Street bailout to help the companies. A Senate vote could come as early as Thursday, but supporters were struggling to round up enough support for passage.

Pete Hastings, a senior analyst with Memphis, Tenn.-based Morgan Keegan & Co., said if Detroit is allowed to fail, it would only speed up a trend that already is well under way.

“We have seen a number of jobs move from the unionized North, or the more expensive North” to the South, he said. “It has been a slow transformation and win for the South and a loss for the Rust Belt.”
Published in The messenger 11.19.08

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