For many years, the United States automobile industry enjoyed the position of being one of the most, if not the most, profitable industries in the country and perhaps, the world. Now the best way to describe the industry is by the use of words such as: eroding, decaying, disintegrating and failing. General Motors and Ford have been feeling the negative impact of the tremendously successful Japanese auto industry for a number of years and now, Chrysler Corporation which had enjoyed recent successes with its bold style designs is feeling the crunch as well due to a significant decline in the demand for its trucks, minivans and sport utility vehicles (which accounted for 71% of its unit sales.) GM and Ford are implementing significant restructuring plans. Earlier this year, GM offered a buyout and retirement plan which was accepted by 34,000 of its 135,000 union workers. Ford, after losing $1.4 billion in the first half of this year and expecting a far greater loss in the second half, announced its plans to cut 14,000 white collar jobs in the near future and up to 30,000 hourly manufacturing jobs by the end of 2008. Ford also offered buyout and early retirement packages to all of its 75,000 U.S. hourly employees. Chrysler is projecting a $1.5 billion loss for its current fiscal year and announced production cuts in the third and fourth quarters of the year to reduce dealer inventories. Whenever a major industry has significant job cuts, many other industries are affected. The automakers’ job cuts are expected to cause a wave of job losses across the entire United States where an estimated 13.3 million jobs are dependent on the auto industry and a significant number of these jobs are in California. As you can see, the auto industry is suffering severely and the last thing our country and our state need is more trouble for the industry. Just when one thinks that nothing can happen to make matters worse, something does. Amid all of the turmoil, a new threat has emerged. The new threat to the auto industry and potentially many California jobs is political motivation, specifically that of California’s Attorney General Bill Lockyer. Mr. Lockyer has decided that now, several weeks before the election wherein he is running for State Treasurer is the time to sue the nation’s “Big Three” auto manufacturers for billions of dollars for causing global warming by flooding the air with greenhouse gases emitted from automobile tailpipes. The suit contends that the greenhouse gases are a public nuisance and that automakers should pay for damages to the state’s environment and public works. Whether or not Lockyer is successful in his suit (which seems doubtful since there doesn’t appear to be any factual proof that man is the cause of global warming), the defense will cost the automobile industry an immense amount of money at a time when it is struggling for its life. Cleaner cars The fact is that the automakers are complying with current emission laws and that newer cars are significantly cleaner (estimated at more than 90% cleaner) than those of a generation ago. If this is not adequate, the standards should be increased instead of the industry being sued. In addition to causing significant damage to the auto industry, the lawsuit will cost the state substantial amounts of money for what could ultimately be determined to be a frivolous lawsuit. The only party that appears to be benefiting from the filing of the suit is Mr. Lockyer, who has received significant additional name identification through the media at no cost to him. It appears that the main reason for the filing of this lawsuit is political gain and the result is potentially huge costs to an industry and a state that neither can afford. If this is true and this is the way Mr. Lockyer, as Attorney General, spends our money and exercises judgment that can have a substantial effect on our economy, what will happen if he becomes our state’s Treasurer in November? This month I have chosen to profile the following Business/Job Killer bill: – SB 768: This bill would prohibit the use of radio frequency identification (RFID) in four types of government issued identification documents. Due to the use of rapidly expanding technology at the federal level, it is contemplated that soon many federal services and privileges will be utilizing RFID and smart-card technologies as their only means of access. Unfortunately SB 768 would prohibit California from utilizing the technology based on false fears of identity theft. RFID technology improves accuracy in transmitted information, incorporates state-of-the-art privacy protections and is much more cost effective than previous technologies. Unwarranted restrictions on the use of RFID will reduce California’s competitiveness and potentially cause the loss of business and jobs. Status: Passed Senate and Assembly, vetoed by Governor on 10/2/2006. Valley Legislators voting for bill: Senate: Alarcon, Kuehl, Scott, McClintock; Assembly: Frommer, Koretz, Montanez, Pavley. Valley Legislators voting against bill: Senate: Margett; Assembly:Richman,Strickland, Sharon Runner. Valley Legislators absent, abstaining or not voting: Senate: Runner; Assembly: Levine. Gregory N. Lippe, CPA, is Managing Partner of the Woodland Hills-based CPA Firm of Lippe, Hellie, Hoffer & Allison, LLP and a Director and Vice-chair of the Valley Industry and Commerce Association (VICA).
