- The Washington Times - Friday, May 1, 2009

WARREN, Mich. — Mayor James R. Fouts says it could have been worse. “It’s not as bad as being shut down permanently,” Mr. Fouts said of the Obama administration’s announcement Thursday that Chrysler would move ahead on a bankruptcy.

Nonetheless, the mayor, state lawmakers and residents in this automotive center north of Detroit predict much pain ahead for auto suppliers and workers.

The decision has heightened fears throughout this county, home to many of the Big Three’s auto parts suppliers along with massive General Motors and Chrysler plants. Their business contributes to 15 percent of the city of Warren’s budget.

“It was a choice between two evil choices, and it was the lesser of the two evils. Chapter 11 is better than Chapter 7,” said Mr. Fouts, who has been a vocal supporter of the auto companies and has championed a “Buy American” movement in his city.

“I think Fiat can bring a lot to the table and maybe save Chrysler,” he said of the historic automaker’s likely future. “But right now, it is looking rough for retirees and union workers. They’ve already had a lot of restructuring, a lot of layoffs and cuts and now they are going to make even more compromises with a lot more suffering.”

Independent auto analyst Erich Merkle, like some Michigan lawmakers, said he’s questioning whether any bankruptcy proceeding can be fast, even though President Obama has suggested that the process would move quickly.

“I think the government is running a big risk,” he said. “This is a good trial run with Chrysler before we get to GM and whether it can be contained. Chrysler can maybe be controlled in terms of a risk to the greater systematic economy, but we may want to rethink GM and how they have until May 31” to make a restructuring deal.

“I’ll believe it when I see it,” he said of a speedy bankruptcy process, adding that the president’s optimism that Chrysler can emerge leaner, meaner and more productive may be little more than hype to create confidence, even as control of the auto market slips away.

“It may not be up to Obama. He can’t make consumers buy vehicles. And what will happen to the value of cars? Where will that be in 24-36 months?” Mr. Merkle said. “I think it’s a huge concern, and I think there will be a lot of uneasiness and fear with job losses in the weeks ahead.”

Already, workers at three Macomb County auto plants were sent home early Thursday afternoon in the wake of Chrysler’s plan to close factories on Monday as it moves ahead in the bankruptcy proceedings.

“This is a raw deal,” said Paul Jackson of Utica, Mich., a clerk for an automotive supplier, as he left a Warren convenience store in the pouring rain Thursday afternoon. “Just wait and see what this does to this town, the whole state for that matter. Things are going to get worse before they ever get better. The working people, we don’t deserve this. We’re the ones who’ve already done most of the compromising.”

In the Michigan Legislature, lawmakers showed their anger at hedge fund managers who refused to cut a deal and kept a compromise deal for Chrysler to avoid bankruptcy from moving ahead, likely jeopardizing jobs. State Rep. Tim Melton, Pontiac Democrat, sponsored a House resolution asking the state to disinvest in the hedge funds that did not do their part to stave off bankruptcy. It quickly passed.

“Thousands of Michigan jobs and the future of Chrysler are on the line because these wealthy hedge fund managers put their short-term interests ahead of our workers and the auto industry,” Mr. Melton said.

One Chrysler dealership in the Detroit suburb of Birmingham touted “lifetime oil changes” in a banner displayed on the front of its window, but many here wonder how many dealers will be left to make good on that claim.

National Automobile Dealers Association Chairman John McEleney said in a statement that his members pledged to make good on all warranties to make sure customers were taken care of. He called the news of bankruptcy “especially disappointing” and urged those involved to move quickly to get out as soon as possible.

He added that bankruptcy “must not be used to drastically reduce dealer numbers.”

“Dealers generate more than 90 percent of manufacturer revenue and are not a cost to the automaker. A rapid reduction in dealer numbers would not only do absolutely nothing to improve Chrysler’s viability in the short term, but it would actually work against Chrysler’s stated objective to increase revenue and cut costs.”

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