Six months after their meeting was cancelled by a scheduling conflict, the leaders of America’s Big Three domestic automakers finally get to meet with President Bush at the White House Tuesday. And they will have plenty to talk about.
Chief among the topics of conversation will be the rising cost of health care, pensions, energy and commodities, like steel. The auto executives are also expected to discuss trade issues, such as the big advantage an artificially weak yen is giving Detroit’s Japanese rivals.
“They will probably talk about issues that are on the industry’s mind right now, like national health care and steel prices. But will there be tax relief for the industry? I don’t think so,” said George Magliano, director of automotive industry research for the Americas at Global Insight. “It’s really more of a meet and greet.”
Magliano said the Big Three likely don’t expect to seal any deals during their scheduled 45-minute afternoon meeting with Bush. Instead, the leaders of General Motors, Ford and DaimlerChrysler AG’s U.S. arm Chrysler will be pushing for greater appreciation of the difficulties facing their businesses.
Bush will meet with GM Chairman and Chief Executive Rick Wagoner, Ford Chief Executive Alan Mulally and Tom LaSorda, president and chief executive officer of Chrysler Group.
The political landscape has changed radically since last spring, when the automakers originally were supposed to meet with Bush, although it is not clear how or whether the industry will benefit from last week's midterm elections, which swept Democrats into power in the House and Senate.
One promising sign for the Big Three is the ascendance of Rep. John Dingell, D-Mich., a longtime friend of the industry who is in line to lead the House Energy and Commerce Committee.
Detroit’s biggest automakers visit Washington in the midst of huge restructuring programs — including massive job cuts and plant closures — aimed at staying competitive with their overseas rivals. GM, in particular, seems to be making progress with its turnaround efforts, but significant challenges remain for the industry.
A key theme will be competitiveness, said Mulally in an interview with the Detroit Free Press published Friday.
“What I’m looking forward to [in the meeting with Bush] is just sharing with him the state of our industry and also talking about competitiveness going forward,” he told the newspaper. “A level playing field is really important.”
One of the biggest problems the Big Three faces is the cost of health care for employees and retirees, which adds some $1,000 to the cost of every car they make. Automakers argue that they have already negotiated significant health care benefit reductions with their labor unions, and now it’s up to Washington to fix the broader national problem.
“The U.S. government doesn’t pick up health care costs for U.S. manufacturing, whereas many foreign governments do pay health care bills, and so relieve that cost,” said Alan Tonelson, a research fellow at the U.S. Business and Industry Council, a Washington-based research organization that follows manufacturing. “So Bush will hear from the automakers how the U.S. health care system puts companies like theirs at a competitive disadvantage, but I don’t think they are going to be able to give him very clear advice on this. It’s a much broader problem.”
Pension costs are another issue for the Big Three. Among them, they provide retirement benefits for 740,000 current workers and retirees, running up a bill for $11 billion a year according to data from the Automotive Trade Policy Council — that’s a fraction of the amount overseas automotive companies pay their U.S. workers.
“[The automakers] may ask the White House for pension help. It’s a major cost they presently bear, and they have argued that because of the way pensions are structured in Japan and Europe, their foreign competition doesn’t face the same issue,” Tonelson said.
“But if they were somehow relieved of this obligation, it raises the question of who will take it on, and the likely answer is the American taxpayer,” he continued. “The cost could be added to the deficit, but lots of people think that’s already high enough. So I really don’t think there is much President Bush can offer on pensions right now.”
Automotive executives may also find little movement on the issue of the Japanese yen, which they complain the Japanese government artificially suppresses, making imported goods from Japan cheaper, including cars.
“They are making more noise about Japanese currency manipulation because they find themselves competing with huge volume of Japanese imports at home, but most governments in East Asia have kept the value of their currencies artificially low vs. the U.S. dollar, and that makes their products more price-competitive all around the world,” Tonelson said.
“But because both GM and Ford are producing vehicles in China and have looked at China as a very significant export base, they haven’t said much about China’s currency manipulation because it keeps the price of vehicle production in China artificially low. So President Bush might be confused by that inconsistency,” he added.
Detroit could see more help on the subject of energy.
The idea of energy independence is one heard frequently from Bush, and Democrats are expected to be more open to measures that deal with the reduction of greenhouse gases. GM and Ford have both pledged to raise the number of vehicles they produce that run on E85, a biofuel that is a mixture of 85 percent ethanol, derived from crops, and 15 percent gasoline.
Democrats may also support tougher fuel economy standards for passenger cars, which is something Bush supports, but the measure may face opposition from Dingell, who has said higher standards could result in job losses and negative economic consequences.