The Senate did not negotiate on a $14 billion bailout for General Motors and Chrysler Thursday night, after the objection to a house bill passed on Wednesday. General Motors Corp., Ford, and Chrysler, also known as "The Big Three," have requested emergency loans to prevent their companies from deteriorating, but the decision to sell yet another bailout seems skeptical to more than just the Senate. Lawrence Ford, and GM dealerships feel the strain from this delayed bailout that has yet to be finalized.
Ford Laird Noller Auto manager, Gary Bennett, has noticed the slow business for everyone, but the long term effects of the auto industry failing would be more devastating.
"Ford may not need the money now," Bennett Said. "But if we do get some money as a relief, it will create a lot more sustainability at our Lawrence dealership."
Ford said it may be able to survive for now without federal aid, but it asked for $9 billion in loans if the auto industry continues to worsen.
"We need this bailout," Bennett said. "It would be a huge devastation on our Lawrence dealership and nationwide."
Realizing long term effects the U.S will have if the auto industry fails is what Bennett hopes the Senate will do.
"It would be damaging for our economy, and it would open doors for more foreign competitors," Bennett said.
The economic storm throughout the U.S continues to impact auto sales figures, showing the seriousness of the situation. According to the U.S light vehicle, sales at GM and Chrysler dropped more than 40 percent in November, while Ford's sales dropped 31 percent.
"There has been a lot less interest in customers buying new vehicles," Daley Willey, Owner of Lawrence GM Dale Willey Auto, said.
The dramatic decrease in GM sales caused Willey to make significant changes at his dealership.
"We have reduced employment by 20 percent," Willey said. "The problem has resulted to this at our dealership, but the problem for the U.S is that it may result in a depression."
But is now the time to cut back? City of Lawrence Finance director, Ed Mullins said, dealerships will loose even more sales.
"The budget of Lawrence is directly effected by the decrease in local dealership sales because of the sales tax," Mullins said.
If there continues to be a decrease in important revenue sales from Lawrence Ford and GM dealerships, sales tax in Lawrence will increase.
"The sales tax needs to meet production," Mullins said. "Sales tax of a $30,000 car makes more sales tax than a $10 t-shirt on Massachusetts Street."
Manufactures and employees of Ford and GM dealerships living in Lawrence are at risk of getting laid off because of this auto industry crisis, Mullins said.
"A reduction in employment at Lawrence dealerships may force people to sell their home," Mullins said. "This in turn will slow the potential population growth in Lawrence."
The situation will get worse before it gets better is the way KU Business Economics professor, John Stratton looks at it.
"It's the tale of two bailouts," Stratton said.
Whether the bailout passes or not, local changes are going to have to be made, Stratton said.
"The number of Lawrence dealerships may be cut back severely," Stratton said. "There needs to be restructuring of GM and Ford auto companies."
Auto companies started suffering because of lack of planning, and customers pulling back on buying because of the economy, Stratton said.
"The two companies have been confronted with lots of quality issues," Stratton said. "The core reason for this problem is in the management of these companies."
The talk of the U.S falling into a depression if the auto industry fails is something, economic optimist, Stratton said hopefully will be turned around with President-elect Obama.
"It's too early to talk about depression," Stratton said. "We are not quite there yet."
During the 1970s depression, over a million a month were loosing jobs, nationwide in November this year, about 500,000 have lost their jobs, Mullins said.
"The unemployment rate during the 70s depression was 32 percent," Mullins said. "The U.S currently has a 6 percent unemployment rate, so calling it a depression is inaccurate."
"A lot of people are taking advantage of the situation, so they call it a depression," Mullins said. "It's instead a recession, and its primarily hitting financial systems now."
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