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Ford to get green, Nanjing plant may be model

By Cai Hong (China Daily)
Updated: 2009-05-25 08:02

GM's application is also questionable since the auto producer is facing a June 1 bankruptcy deadline. Its latest restructuring proposal calls for giving the government a 50 percent stake in the company in exchange for debt forgiveness, with an additional 39 percent going to the United Auto Workers for relief on pension and healthcare obligations. This leaves only 10 percent for bondholders - those who are supposed to be first in line to collect any assets. The existing shareholders will be left with 1 percent. Analysts say bondholders will laugh off the offer, making bankruptcy a certainty. They will get more of their money back that way.

The enlarged loan program may be a rare bright spot for auto parts companies, which have had little to cheer about recently.

Many of the nation's roughly 5,000 suppliers have been hit as GM, Chrysler and Ford reduced production because of falling sales. Some 20 auto suppliers have filed for bankruptcy this year.

"About 50 percent of the suppliers' production capacity is idle," said Neil De Kocker, president and CEO of the Original Equipment Suppliers Association in Troy, Michigan.

"In the next two months it will hit 60 percent," he said.

Chrysler plans to stop production at its North American factories until its sale to Italian automaker Fiat Group SpA is complete and GM has decided to suspend production at its own plants in the US and Mexico for as long as 11 weeks, starting later this month.

But top parts suppliers such as Eaton, Honeywell and Alcoa should be optimistic about their survival thanks to the government loans. The financial aid will help these companies adapt to the auto industry's green shift.

Obama's announcement on tailpipe emissions is also a roadmap for the auto industry, according to Ford's Hsu.

Before the announcement, California and 13 other states were trying to establish their own standards. Obama's plan will make those standards a national benchmark.

"Car companies gain a simpler and more predictable regime," said Hsu.

Tax on carbon emissions collected from auto companies will likely go into a pool of capital to support the auto industry's fuel-efficient vehicles.

The new rules should force the companies to shift to making smaller vehicles.

But, with gas prices low in the US, government aid alone is not enough to encourage green vehicles, said Gary Witzenburg, a former GM public relations worker who was involved with the ill-fated EV1 (the first electric car from a major automaker).

Witzenburg recommended gasoline prices be raised to push consumers away from big vehicles and toward hybrid cars.

"But that is politically impossible for the Obama administration," said Witzenburg.

Daniel Howes, a Detroit News columnist, did not welcome the new policy.

"Nowhere was there a prediction that an Obama White House would facilitate the bankruptcies of two-thirds of Detroit Auto, which it has. Or that it would broker the killing of brands, the closing of factories, the apparent reordering of federal bankruptcy law or the importation of new production from Mexico and China instead of metal coming from Canada," he said.

 

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