Buffalo News (New York), December 20, 2008, Saturday

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Buffalo News (New York)

December 20, 2008, Saturday

HEADLINE: Local workers, dealers breathe a sigh of relief

BYLINE: By Matt Glynn - NEWS BUSINESS REPORTER

BODY:
President Bush's announcement of government loans to General Motors Corp. and Chrysler LLC will provide sta-bility to the auto industry in the Buffalo Niagara region, industry observers and stakeholders said Friday.

"We're encouraged that the president has stepped up to the plate and allowed an opportunity to keep the Big Three viable for this time period," said Kevin Donovan, assistant regional director of the United Auto Workers.

There were fears that if a rescue package did not come by year's end, at least one of the automakers might have collapsed, unleashing a ripple effect in the economy that would have hit the Buffalo Niagara region.

The region has strong ties to the auto industry. GM's engine plant in the Town of Tonawanda and Ford Motor Co.'s stamping plant in Hamburg combined have about 2,200 employees. The region is also home to many suppliers, includ-ing Delphi Corp. and American Axle & Manufacturing, as well as numerous auto dealers and a large population of au-to-industry retirees who depend on the automakers for benefits.

Art Wheaton, director of labor studies at Cornell University's School of Industrial and Labor Relations in Buffalo, praised the rescue plan.

"I think President Bush actually made a very courageous, very correct decision," he said. "I think he did the right thing in a very difficult time."

The loans will benefit the industry locally, as well, Wheaton said. "I think it secures the future of the Ford stamping plant and the GM engine plant."

Ford did not request a government loan, saying it does not face a short-term liquidity issue, but it is seeking a line of credit of up to $9 billion in bridge financing as a backstop. And Ford was supportive of the loans to GM and Chrysler, saying a failure by one or both of those companies could have a destructive economic impact.

A fact sheet distributed by the White House about the loans includes items calling for making workers' wages and work rules "competitive" with those at U.S. auto factories run by foreign-owned carmakers by the end of 2009.

Patrick Heraty, a professor of business administration at Hilbert College, noted that those particular items were identified as "targets."

"On the one hand, those are not mandates, but I suspect Congress will want to see some progress made in those areas, as well," he said.

Heraty said the UAW has proven amenable in recent years to making changes related to wages and benefits. But the union has also taken the position that other parties, such as the management of the auto companies, need to make more sacrifices as well, he said.
Donovan, the UAW leader, said it was too soon to say what the loan plan will mean for the workers represented by the UAW.

"Obviously, right now that is something between the UAW and the companies that we have to negotiate," he said.

While the White House loan package provides immediate and temporary financial support, it also calls for GM and Chrysler to make substantial changes within just three months.

The White House says that if the firms have not presented a plan to become viable by March 31, the loan will be called and all funds returned to the U.S. Treasury.

Nallan Suresh, chairman and professor of operations management and strategy at the University at Buffalo's School of Management, said he believes the automakers can meet the deadline. He also thought it was a good idea that they were given such a tight timetable.

"They very well know what needs to be done," Suresh said.

He thinks the UAW will do its part to support the plan. "It's a matter of survival," he said. "If they don't make con-cessions, the industry will not last."

Management will also have to make sacrifices and changes in order for the plan to succeed, he said.

"I know the auto industry has not been very wise in its decisions in the past, but these are unusual times and this announcement [of the loans] was very needed," Suresh said.

During the debate over the loans, everyone from employees to plant managers to dealers and suppliers have em-phasized the loans' impact on the local economy, in the form of jobs, charitable contributions, tax payments and local purchases.

The loan plan also lessens some of the anxiety for area auto dealers affiliated with the U.S. automakers. Some of them feared that a Chapter 11 bankruptcy filing would drive away customers worried about warranties and future ser-vice.

"We needed a little vote of confidence," said Paul Stasiak, president of the Niagara Frontier Automobile Dealers Association. "I think the dealers are a little relieved. This isn't a closure, but it's the next step in the journey."

e-mail: mglynn@buffnews.com

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