The Big Three aren't the only ones having a tough time of it. The German auto industry is in crisis too.
Sales in Germany have crashed to their lowest level since 1990, so automakers are halting production and shutting down factories to save money. BMW and Daimler have seen their stock plunge 25 percent and are doling out "extended vacations" to employees. Even Volkswagen, which has a strong product line generally regarded as best suited for surviving the crisis, has extended the Christmas break by five days to cut costs. The situation is hardly comparable to what's happening in Detroit, but still the outlook for German car manufacturers isn't good.
"Export and production will drop significantly," Mathias Wissmann, president of the German Association of the Auto Industry, told Reuters. "The situation on global passenger car markets is dramatic."
Unlike Washington, Berlin has so far refused to step in, and some say its refusal to grant significant aid to ailing industries is exacerbating the problem.
The government has spent a mere $5 billion to help Germany's $3.2
trillion economy. Such a minuscule sum in comparison to the $700 billion check that Congress wrote has some in Germany accusing Chancellor Angela
Merkel of dragging her feet.
She's under mounting pressure to do something to revive the economy and back a $2.5 trillion stimulus package put together by leaders of the
European Union.
Many in Germany's automotive industry blame their predicament largely on a drop in sales and don't know what to do if the government doesn't step in. But German Finance Minister Peer Steinbrück has slammed the bailout mindset, telling The Telegraph,
"Europe's is not on the brink of collapse . . . Just because all the lemmings have chosen the same way doesn't make it automatically right." Such comments have done little to comfort the bosses at VW, Daimler and BMW who have gone as far to support a bailout of Detroit. It's counterintuitive, but the Germans have no interest in seeing their competitors go down.
"You can't underestimate what would happen when a large player collapses," BMW CEO Norbert Reithofer told Bloomberg. "That would impact the supplier structure and therefore the entire industry."
The German automakers who build cars in North America get a lot of their parts from the same companies that supply Detroit. Many of those suppliers would be hard hit, if not crushed entirely, by the collapse of an American automaker. As a result, the shock wave brought about by a collapse of one or more of the Big Three would delay the German auto industry's recovery.
Lawmakers from the southern states where most European car companies have factories agree the fall of Detroit wouldn't do BMW, Daimler or VW any good, but they still oppose bailing out Detroit. Republican Sen. Lindsey Graham Rep. of South Carolina (where BMW has a plant) says Detroit is "doomed." Republican Sen. Richard Shelby of Alabama (where Mercedes has a plant) says he has "little faith" The Big Three won't keep asking for money. And Republican Sen. Bob Corker of Tennessee
(where VW is building a plant) says he is "disappointed" with the rescue plan.
Still, it looks like Congress might throw Detroit a $14 billion lifeline to keep it afloat until the Obama Administration can wade into the mess. The proposal includes the appointment of a "car czar" to restructure the domestic auto industry. You can bet the German automakers will be paying close attention to how the deal plays out and what the car czar does to Detroit. Given the state of the world economy and the German auto industry, BMW, Daimler and VW could be formulating their own restructuring plan before long.
Photo by BMW.
