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Officials, Companies Around the World Worry About US Auto Industry

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U.S. automakers are struggling to survive, as tight credit and the economic slowdown slash car and truck sales. The U.S. Congress has put off a decision on helping the faltering, big three automakers. Some economists , business leaders, and officials warn that inaction will bring devastating consequences for the industry, and have repercussions around the world. VOA's Jeff Seldin looks at what analysts say could happen if General Motors, Chrysler, or Ford collapsed.

Concerns about the U.S. auto industry are running high in America. But analyst Kent Hughes at the Woodrow Wilson Center in Washington says officials around the world have reason to fear, should one of the major U.S. car companies fail. "The supply chains for the "Big Three" automakers, the "Detroit Three," really extend all around the world. So the parts makers, plastic makers, people who provide the paint, the whole host of suppliers would be thoroughly disrupted."

The U.S.-based Center for Automotive Research says the collapse of one of the "Big Three" automakers would cost the U.S. economy billions of dollars. Hughes says that would have consequences far beyond the U.S. automotive center in Detroit. "It would ripple all across the country, affecting small communities and large communities in many other states, which in turn would reduce our demand overall for imports from the rest of the world, which would in turn weaken their economies," he said,

Japanese Finance Minister Shoichi Nakagawa, speaking to Bloomberg through a translator, agrees that, if one major U.S. car company crashes, the problems would spread. "The auto industry is a hugely important employer with so many related industries. So, the effects would not simply be the collapse of a single company. There would be a very large and negative effect, and not just for America, but for Europe and Japan, as well."

The impact is already being felt at the world's largest chemical company, BASF, which announced it will suspend operations at 80 plants, affecting 20-thousand workers.

BASF Chief Executive Officer Juergen Hambrecht tells Bloomberg, if the economic situation does not improve, more jobs could be at risk. "You look into our custom industries, automotive, textile and construction, you all see closures and plant shutdowns, and this has a major impact on our business."

And Jesse Toprak with Edmunds.com, a Web site that studies the auto industry, says small, regional companies that feed the auto industry could also be affected. "For example, the goggles that the workers wear on the line, or the gloves that they wear. They (goggles and gloves) don't go into (the making of) the car, but they need them to make the car. So, all these supplies, which if you can imagine the production of all the domestic three across the world, adds up to tremendous amounts. And, it really trickles down."

However, Toprak says trouble for the U.S. car companies may not be bad for competitors. "The good news is that, whenever a competitor is suffering, that usually means a company has a higher chance of grabbing that market share and growing. The bad news is that no one is immune to the weakness of the marketplace nowadays."

Carlos Ghosn, chief executive officer of Japanese carmaker Nissan, agrees. "I think, a lot of the car manufacturers are going to be finding themselves in a situation where they are going to have to preserve cash, which means cutting on investments, lowering inventories, reducing head count (employees)."

Such concerns are putting pressure on officials, not just in the U.S., but also in Europe and Asia, to help automakers survive. And the concern has filtered down to the man on the street.

Even Tian, a taxi driver in China, is worried. He says American car companies have global influence, and that, if they are in trouble, there could be problems for everyone.

General Motors spokesman Tom Wilkinson says money spent on helping car companies will pay off, as the economy rebounds. "Russia or Brazil or China, when people get to a certain income level they want cars."

But another Chinese taxi driver says the U.S. auto companies need to do more to be successful. He says they should start by making their cars more fuel efficient.


Jeff Seldin

Jeff works out of VOA’s Washington headquarters and is national security correspondent. You can follow Jeff on Twitter at @jseldin or on Google Plus.

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