Alabama's big 3 automakers report plummeting sales

Detroit's big 3 automakers have turned in their applications for federal loans to try to stave off bankruptcy, sparking a lot of controversy.  Some economists say we should loan government dollars to the automakers and other economists say we shouldn't.  It's hard to know what to believe.

Senator Richard Shelby, Republican from Alabama and ranking member of the banking committee, is one of those who opposes a loan to the U.S. automakers.  Alabama, Shelby's home state is also home to automakers Mercedes, Hyundai and Honda. Shelby's opinion may not be completely unbiased on the subject of federal loans to automakers based in Michigan.

Opponents of the government loan to Detroit automakers repeatedly argue that U.S. automakers haven't been competitive with foreign automakers.  The foreign automakers, opponents say, are building better fuel efficient cars than their American counterparts.  An example they love to point to is the Hummer and one must concede that it is a great example.  However, opponents' arguments imply that the foreign automakers build fuel efficient vehicles and the American automakers build gas guzzling SUVs as if the issue is black and white.  And that isn't an accurate way to potray the auto industry.

Chevrolet is set to launch its first electric car in 2010.  Saturn and Ford both produce hybrid vehicles and have plans to build more.  And while it's true that American automakers produce an abundance of SUVs, the same can be said of the foreign automakers.  Honda, Toyota and Mercedes all produce SUVs that aren't noted for fuel efficiency.  

The Mercedes-Benz G-Class SUV with a retail price of between $100,250-$119,450  claims to get 11-15 mpg.

Honda's Ridgeline pickup truck starting at $28,000 gets an estimated 20 mpg.

Hyundai's Tucson SE SUV, $19,970-$25,620 gets an estimated 18 mpg city/ 23 mpg/ highway.

Toyota's Tacoma 4x2 PreRunner truck, $19,652-$21,420 gets an estimated 15 mpg city/ 19 mpg highway.

Chevrolet has built an impressive array of hybrid vehicles and is set to release its first electric car, the Chevy Volt in 2010.   Saturn offers two hybrid vehicles and Ford builds a hybrid car and plans to introduce a hybrid SUV in 2010.  

Both American and foreign automakers can build all the hybrid, electric and hydrogen vehicles they want but will American consumers buy them?  Since gas prices have gone down in the last couple of months, American car buyers responded by purchasing cars that are not fuel efficient.  

Automobile sales are down for the year.  But they aren't down just for Ford, GM and Chrysler.  Sales of cars built in Alabama by Mercedes, Hyundai and Honda are down 38%  from a year ago.

Sales of Honda's minivan, Odyssey, which is made in Alabama, are down 46 % over last year.  The Hyundai Sonata, made in Alabama has seen sales plummet by 55% from a year ago and their Santa Fe SUV has seen a drop of 42%.  

Alabama-made Mercedes-Benz G-Class SUV sales fell 33% from last year.

In total, Honda's overall sales in November dropped 31.7% from the previous month and Hyundai's dropped 40%.  Ford sales fell 31% and Toyota sales dropped 33%.  

Alabama's Senator Shelby believes the government should not lend money to the Michigan automakers.  He proposes that they go into bankruptcy instead and then restructure.  A bankruptcy and reorganization isn't however, a panacea.  Bankruptcy and reorganization would mean layoffs and in some cases, closings.

Alabamians typically think that the loss of the big 3 automakers in Michigan wouldn't affect them.  But the failure of any or all of the big 3 U.S. automakers would hurt a lot of people.  There are thousands of dealerships across the country that would be adversely affected if not closed altogether, including those in Alabama.  It is also important to note that GM spent $498 million in Alabama during the first 3 quarters of this year.  Chrysler spent $765 million in Alabama this year and Ford says its annual spending in Alabama is around $1 billion.  

The opponents of a government loan to U.S. automakers complain that the Michigan automakers aren't competitive and that their sales are down because they have continued to build fuel inefficient vehicles.  The Michigan automakers say their sales are down because of the current economic recession.  The Alabama automakers, like those in Michigan, say their sales are down due to the recession.  

Whether located in Alabama or in Michigan, if any of the automakers fail, a lot of people will be hurt.  Not just autoworkers but the makers of their supplies, the people who sell their vehicles, and the people who service them will be affected.  The cost of millions of people out of work will ultimately be higher than the cost of a government loan.