"U.S.Auto Industry Key To Economic Recovery" - Commerce Secretary Don Evans

DETROIT, Oct 31, 2002; Tom Brown writing for Reuters reported that United States' Commerce Secretary Don Evans cast the U.S. auto industry in a heroic light on Thursday, saying it had been a driving force behind the economic recovery since the attacks on America last year.

"Obviously I want to thank the auto industry for the large role that they have played in the recovery of this economy," Evans said. "The auto industry has played a major role in this recovery."

Evans spoke to reporters after a meeting with automotive parts suppliers in Detroit, called to discuss some of their concerns about the economy and industry-specific issues, such as the administration's tariffs on imported steel.

He had previously visited the gritty hub of the U.S. auto industry shortly after the Sept. 11 attacks on the World Trade Center and Pentagon, when the Bush administration appealed for help from automakers with the struggling economy.

"They responded to that in a powerful way," Evans said.

It was immediately after his earlier visit that General Motors Corp., the world's largest automaker, rolled out interest-free financing and other deep discounts as part of a program to boost new vehicle sales patriotically dubbed "Keep America Rolling."

Quickly matched by Ford Motor Co. and DaimlerChrysler AG's, Chrysler arm, Evans said the zero-percent loan deals had kept U.S. vehicle sales running at a blistering pace for most of the past year.

"We've been seeing record auto sales over the course of the last basically 12 months I guess," he said.

Auto sales account for roughly one-fifth of U.S. retail sales and Evans is not alone in saying they have helped prop up the slowly recovering economy.

But sales were off sharply in September, and automakers are expected to show more steep declines when they report October sales on Friday. If the lure of interest-free financing has finally worn off, the next question is whether the auto industry could drag down the economy overall, with consumer sentiment now hovering at nine-year lows.

Evans did not address those concerns in his remarks to reporters and auto parts suppliers.

"A TOUGH PERIOD"

But alluding to the razor-thin profit margins at U.S. automakers, along with their top-heavy cost structures and mushrooming pension liabilities, Evans did say that some U.S. automakers were facing a particularly "tough period" right now.

"I know that some of the companies are going though a difficult period financially," he said.

"It's just a period that I'm confident they will be able to work through, they've been able to do it before," he added. "These are very strong companies and I'm confident, as we continue to see a recovery in this economy, that these industries will do okay."

He did not elaborate but said the administration had no immediate plans to help shore up the bottom line of Detroit's automakers, whose spending on discounts has weighed heavily on potential profits.

The Big Three spent an average of $2,100 per vehicle on an array of incentives -- including cash rebates and free loans -- to lure customers into showrooms in September.

"We don't have any specific targeted programs for the industry," Evans said.