Autos

Michigan lawmakers lead congressional push to include auto industry in next stimulus bill

Key Points
  • A bipartisan group of lawmakers is pushing U.S. House leaders to include the American auto industry in the next round of stimulus spending.
  • Michigan Reps. Debbie Dingell, a Democrat, and Fred Upton, a Republican, are leading the group of lawmakers from states with big auto manufacturing facilities.
  • One option some have floated is a new, updated version of "cash for clunkers," a federal program that stimulated auto sales during the last recession in 2009. 
Line workers work on the chassis of full-size General Motors pickup trucks at the Flint Assembly plant on June 12, 2019 in Flint, Michigan.
JEFF KOWALSKY / AFP / Getty Images

With Washington authorizing trillions of dollars in economic aid for thousands of companies, ranging from small businesses to the largest airlines, some on Capitol Hill believe it's time to help out the auto industry. 

A bipartisan group of lawmakers led by Michigan Reps. Debbie Dingell, a Democrat, and Fred Upton, a Republican, is pushing U.S. House leaders to include the American auto industry in the next round of stimulus spending, according to a copy of a letter to House Speaker Nancy Pelosi and Republican Leader Kevin McCarthy.

"The projected economic fallout for the industry is grave," reads the letter, also signed by seven other lawmakers from Michigan, Ohio, Tennessee, Texas and Alabama, all states with big auto manufacturing plants. The group is circulating the letter, which was obtained by CNBC, to rouse more support before sending to House leadership. "April was the worst month in decades for car sales. Rental car companies struggle on the brink of closing forever.  Many businesses in the industry face a cash crunch even as they prepare to ramp back up."

U.S. auto sales are estimated to fall by as much as 30% this year, they said. In April, the pace of auto sales fell to 8.6 million vehicles as North American auto plants remained closed for most of last month, according to the research firm AutoData, which tracks industry sales. That pace of sales is down 48% from 2019, when industry sales topped 17 million vehicles for a fourth straight year.

"Liquidity is challenging, particularly for suppliers, and it will be necessary to support demand for some time to ensure a meaningful recovery," reads the letter. "In some regards, challenges the industry face exceed those of the 2008 financial meltdown."

While Congress earmarked $50 billion for the airline industry, it has largely avoided picking other specific industries that should receive federal aid to offset the impact of the coronavirus.

The pandemic has cost automakers and suppliers billions of dollars, but the industry hasn't been hit as hard as airlines and is not on the verge of collapsing, which would likely make many on Capitol Hill hesitant to sign off on approving grants or loans specifically for automakers.

One option some have floated is a new, updated version of "cash for clunkers," a federal program that stimulated auto sales during the last recession in 2009. Cash for clunkers provided $3 billion in incentives to Americans so they would trade in older, less fuel-efficient models for newer ones. It lead to a 13% spike in new vehicle sales in the summer of 2009. It was crucial to an industry that would only sell 10.4 million vehicles that year, its lowest annual sales rate since 1982.

Ford lost $632 million during the first quarter and projected it will lose more than $5 billion during the second quarter when the full effects of the shutdowns and coronavirus costs take hold, the automaker said last week.

The Covid-19 outbreak cut deeply into General Motors' performance during the first quarter, costing the largest U.S. automaker $1.4 billion before taxes, the company said Wednesday. 

Though it managed to eke out a small profit, it said the second quarter will be far more painful. CEO Mary Barra said she favored anything from Washington that would entice consumers to buy more cars. 

"I think that anything that stimulates demand in these early days that is simple and goes directly to the customer, those purchasing the vehicle, I think that is going to be helpful to get people back into the market," she said during a conference call with analysts.

— CNBC's Meghan Reeder contributed to this article.