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EDITORIAL: Scary times for auto industry: Weathering storm in 'Bama
(The Anniston Star Via Acquire Media NewsEdge) Jul. 28--Economists and financial gurus will say it's unwise to place all of one's investments in the same basket. They preach diversity and variety. The fear is that a downturn in one market -- think textiles and Alabama's mill towns -- would destroy a city's financial climate.
Now, think automakers and Alabama's future.
The Chamber of Commerce spiel about Alabama's marriage to foreign automakers is that it's no mere marriage of convenience. Instead, it's a marriage that's brought happiness and productivity to both sides.
Automakers benefit from Alabama's frighteningly low taxes and strong work ethic; the state benefits from an infusion of high-paying jobs and the arrival of spin-off companies that pop up near any assembly line.
Nevertheless, it's incorrect to say that Alabama's portfolio is dominated solely by foreign automakers; there's high-tech in Huntsville, tourism on the coast, higher education in many Alabama towns, and a nice collection of non-automotive industries dotted across the map. Even with the state's latest flirtation with Volkswagen, diversity exists in the state's economic development.
Yet, these are chilling, scary times for companies -- foreign or domestic -- that make cars, trucks and SUVs. Ford Motor Co. posted its worst quarterly performance in its history on Thursday, losing nearly $9 billion in the second quarter of this year. Used-car lots across America are teeming with gas-guzzling trucks and SUVs that can't be sold.
And automakers are scrambling to either limit production of their larger, suddenly unpopular vehicles, or to switch their assembly plants from making trucks, SUVs and vans to making more fuel-efficient cars. It's no shock that the ripple effects are reaching Alabama.
Mercedes-Benz is being coy about specifics of the plan for its Vance facility, but the company is reducing production. Holiday schedules will be lengthened, and some night shifts will be reduced.
In Lincoln, Honda also is reducing production of its Odyssey minivan and Pilot SUV. It's thankful that no layoffs are planned, but the more than 4,000 Honda employees in Alabama will see a limiting of second shifts for the next three months.
Alabama's fortunate in that the automakers that have set up shop in the state aren't as succeptible to the nightmare that's hit that industry. While American-made automakers have been slow to embrace the public's need for fuel efficiency, some foreign companies have been quicker to act on Americans' desires for high-mph vehicles.
A worthy side note: Honda Motor Co. announced Friday a record profit for the first fiscal quarter due to sales growth in new international markets.
There's comfort in knowing that Alabama is the Detroit of the South, and that the state's automaking industry isn't suffering as intensely as the real Detroit. But the harrowing times for that industry are worth watching here in Alabama. Considering the economic reality of today, it could get worse before it improves.
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Copyright (c) 2008, The Anniston Star, Ala.
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