This, too, shall pass. But then what?
The halting of most automaking activities is a painful exercise in public and private safety, an economic hardship to minimize the loss of life. The U.S. government, like others around the world, has acted quickly to address the immediate impact of so many factories and retailers suddenly closing for the greater good. But the $2.2 trillion Coronavirus Aid Relief and Economic Security Act is just a first step. More will be needed and more will be done.
For the auto industry — one of the world’s biggest and most complex production and retail systems — there will be significant working-capital needs. Across the vast network of auto suppliers, billions and billions of dollars will be needed to buy raw materials and meet payroll and pay for utilities and shipping and other costs before payments start flowing in.
The early days of the CARES Act have seen some lenders fail to embrace the spirit of cooperation intended by the government’s extraordinary deficit spending.
The Federal Reserve has shown its willingness to fund the financial system, but there also need to be mechanisms for getting that money to manufacturers: There’s no benefit in priming the pump if there isn’t actually a pump.
That pump-assembly work needs to be done now, while everything is shut down — not when it’s time to resume work and the chain’s weakest links have failed.
It’s often the smallest suppliers that are least capitalized and able to fund the sudden downturn and rapid ramp-up. They will need to borrow money so they can employ people and sell parts to their customers, so they can employ people and sell components to automakers, so they can employ people and sell vehicles to distributors and dealers, who also need people working to sell vehicles and service them.
Industry organizations such as the Original Equipment Suppliers Association, Motor & Equipment Manufacturers Association and the Alliance for Automotive Innovation need to lobby and make these future needs known. Allies including Rep. Debbie Dingell of Michigan need to keep the industry’s concerns before congressional leaders.
Commerce Secretary Wilbur Ross can share his deep knowledge of industry and finance to help craft a system that will efficiently get this massive economic machine cranking again. It needs to be ready before production resumes. The time to act is now.