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CAW Statement
Plunging Auto Sales Reflect Effects of Credit Crisis, CAW Says; Calls for Government Participation to Prevent "Industrial Disaster"
TORONTO - The dramatic decline in North American auto sales
last month (to their lowest levels since the recession of 1991) reflects the
crisis in credit conditions in the industry, says Ken Lewenza, President of
the Canadian Auto Workers. He called for North American governments and
central banks to act immediately to offset the industry's credit freeze, with
the same urgency as they have assisted banks and financial institutions.
"The federal government and the Bank of Canada have channeled close to
$50 billion in financial assistance to Canadian banks and other financial
firms," Lewenza said. "But banks aren't the only victims of this crisis."
"It is essential that our government, in concert with U.S. officials,
move quickly to get credit flowing again through the auto industry," he added.
"Otherwise, we will face an industrial disaster, with consequences that will
haunt us for decades to come."
Auto sales declined precipitously in October, especially for the North
American automakers whose internal credit divisions, and whose access to
external credit, has been most damaged by the global financial crisis. The
decline was most severe in the U.S. market - which receives close to
90 percent of the output of Canada's auto assembly sector, and over two-thirds
of Canadian-made auto parts.
According to CAW economist Jim Stanford, "the continental auto industry
is now facing a true credit freeze that is being experienced on several
levels."
First, Stanford said, prospective auto customers cannot obtain credit to
finance new vehicle purchases (especially from the in-house credit divisions
of the automakers, which traditionally finance most car purchases - but which
have severely cut back or eliminated leasing and financing programs in recent
months). Second, new car dealers cannot attain credit to finance their
wholesale orders of vehicles. Third, the automakers themselves cannot attain
financing to carry them through the temporary sales downturn. Finally, auto
parts companies are in desperate financial straits due to falling demand, and
their access to normal operating credit has also been severely compromised.
Lewenza urged the federal government and the Bank of Canada to work to
provide emergency liquidity injections to the auto industry, in the form of
low-interest loans, loan guarantees, and/or the swap of liquid for illiquid
assets. All of these forms of assistance have been offered to Canadian banks
in recent months.
"There is no dividing line between banks, and the rest of the economy.
The credit crisis is now badly damaging our real economy, not just the
financial sector, and government has a responsibility to act," Lewenza said.
"We cannot allow this financial chaos to inflict more bankruptcies, shotgun
mergers, and long-term damage on our real economy."
GM and Chrysler are engaged in merger negotiations - motivated reportedly
by GM's desperate need to access cash resources to survive the credit freeze.
"We shouldn't have to endure wholesale closures and mass layoffs just because
the banking system has failed at its job," Lewenza said. "We should provide
this industry with the credit it needs, rather than rushing into shotgun
mergers that can only destroy jobs and communities in the long-run."
Evidence of the dramatic downturn in Canada's auto sector continues to
mount. During the first 8 months of this year, Canada lost 10,000 more
positions in the auto assembly and parts sectors - bringing the total job toll
since the auto industry peaked in 2001 to over 35,000. Output from Canadian
assembly plants has been cut back sharply, and could fall below 2 million
units for 2008 as a whole (its lowest level in 16 years). Canada's automotive
trade balance has collapsed: the auto trade deficit (which first emerged in
2006) reached almost $10 billion during the first 8 months of 2008, in the
face of plunging exports to the U.S. and record imports from offshore.
"This is an industrial emergency, and government cannot sit on the
sidelines," Lewenza said. He urged incoming federal Industry Minister Tony
Clement to convene an emergency session of the Canadian Automotive Partnership
Council - the joint business-government-labour body that has met only twice
since 2005.
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