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Kentucky Fellows 08 Murray

Auto Industry DA Page 1 of 32

Auto Industry DA

Auto Industry DA....................................................................................................................................................1


Shell (1/2).................................................................................................................................................................3
Shell (2/2).................................................................................................................................................................4
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Uniqueness – slump now (1/2)................................................................................................................................5
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Uniqueness – slump now (2/2)................................................................................................................................6
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Uniqueness – slowly recovering..............................................................................................................................7
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Uniqueness – investor pullout now..........................................................................................................................8
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Uniqueness – green market shift now......................................................................................................................9
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Uniqueness – green coming in future....................................................................................................................10
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Link – innovation...................................................................................................................................................11
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Internal Link – efficiency key................................................................................................................................12
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Internal link – Honda is sweet...............................................................................................................................13
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Internal link – crowd out........................................................................................................................................14
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Internal link – no shift now....................................................................................................................................15
Internal Link – employment (1/2)..........................................................................................................................16
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Internal link – employment (2/2)...........................................................................................................................17
Internal link – key to economy..............................................................................................................................18
Internal link – U.S. econ => Global.......................................................................................................................19
Internal link – U.S. econ => Global.......................................................................................................................20
Brink - industry......................................................................................................................................................21
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Brink – economy....................................................................................................................................................22
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Impact – environment............................................................................................................................................23
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AT IL turn – auto industry key...............................................................................................................................24
AT: Regulations......................................................................................................................................................25
AT government reform/ subsidies..........................................................................................................................26
AT: Big Cars Key...................................................................................................................................................27
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AT: Domestic Market Checks................................................................................................................................28
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Kentucky Fellows 08 Murray
Auto Industry DA Page 2 of 32
Oil saves the economy..........................................................................................................................................29
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Aff – sales strong now...........................................................................................................................................30
Aff – recession won’t happen................................................................................................................................31
Aff – industry resilient...........................................................................................................................................32
Kentucky Fellows 08 Murray
Auto Industry DA Page 3 of 32

Shell (1/2)

A. Uniqueness - Shift to alternatives coming now, but delays ensure the auto industry can adapt
Cape Times, 6/24/2008 (Time to kick the internal combustion habit,
http://www.iol.co.za/index.php?set_id=1&click_id=31&art_id=vn20080624054625374C736912)

London - With oil prices near $140 (about R1 126) a barrel, motorists are starting to look seriously at both alternative fuels and
electric vehicles as a way to be able to keep driving.
But experts say it will take five to ten years for these alternatives to take root, given the capacity challenge for an auto industry that is
adding 65-million new cars a year to a fleet of one billion.
In the meantime, car and parts makers, oil companies and even electricity generators are left guessing which way motorists will turn
and what technology will win.

B. Link - American automobiles can't compete now in a shift away from trucks and SUVS
Associated Press, 7/2/2008 (Honda grows while US auto industry falters,
http://ap.google.com/article/ALeqM5gT--QH7nDfeYg3k7Su8mR1b47k0AD91LV87G0)

To go from trucks to cars, an automaker would have to replace the factory's machines for millions of dollars at a time when losses are
mounting and they're burning up cash, Gardner said.
"Now we're in a situation where because of the cash burn rate, those kind of wholesale investments may be prohibitively expensive,"
Gardner said.
As a result, the Detroit Three could wind up with truck factories sitting idle while they max out the capacity at small-car plants,
Gardner said.
Even a short-term solution — somehow cranking up output at existing car plants — isn't easy either.
Ford Motor Co., which couldn't produce enough Focus compacts last month, is trying to add a third shift so it can run the lone factory
that makes them around the clock. But logistics stand in the way because some parts of the factory can't move as quickly as others.
"In any plant you always have one area that's the bottleneck," Harbour said. "You can only run as fast as that bottleneck."
Relieving the bottleneck might take additional tooling, and that also takes time and money, Harbour said.
"It could take a year or two to get it all done and get it all cranked up," he said.
If the automakers are successful in ramping up small-car production, they shouldn't have problems getting parts because suppliers are
used to making parts at higher volumes, Gardner said.

C. Internal link - Only Honda can compete in a green market – crowds out U.S. industry
Associated Press, 7/2/2008 (Honda grows while US auto industry falters,
http://ap.google.com/article/ALeqM5gT--QH7nDfeYg3k7Su8mR1b47k0AD91LV87G0)

At Honda, Mendel doesn't expect rapid growth. The company's history, he says, is to grow 2 to 3 percent per year in boom times as
well as during downturns.
The company "narrowly" satisfied demand for Civics and Accords last month due to its flexible factories.
Its plants, Mendel said, can switch back and forth almost instantly from one model to another. For instance, a plant in Ohio that makes
Accords also builds the Acura TL luxury sedan, which isn't selling well. So the company made more Accords last month and will
continue to do that until TL sales rebound.
When a new small-car factory comes on line in Indiana next year, the company will have even more capacity to make Civic- and
Accord-size vehicles, Mendel said.
Kentucky Fellows 08 Murray
Auto Industry DA Page 4 of 32

Shell (2/2)

D. Auto industry key to the U.S. economy


Salon.com 2002 (Suzy Hanson, Unsafe at any speed, http://dir.salon.com/story/books/int/2002/10/24/suvs/index.html

You pointed out that this was an underreported aspect of the 1990s boom economy: The auto industry totally blossomed, and because
of the SUV. Exactly. People need to remember that GM and Ford each have seven times the sales of the Microsoft Corp. GM and Ford
are each 1 percent or more of the U.S. economy. Their domestic operations alone are each bigger than the entire worldwide operations
of the entire American airline industry. They're bigger than AT&T plus Microsoft plus IBM. These are the cornerstones of the
American economy, and because of the success of the SUVs in the 1990s, they were able to continue paying very generous labor
contracts to the United Auto Workers union, which spread that prosperity rather broadly through the upper Midwest. As I say in the
book, the median home prices in Detroit rose three times as fast as the national average through the 1990s.

Sing along if you know the words


Bearden 2K
(Lt. Col. Tom, PhD in Nuclear Engineering, "Zero-Point Energy", April 25, http://www.cheniere.org/correspondence/042500%20-
%20modified.htm)

History bears out that desperate nations take desperate actions. Prior to the final economic collapse, the stress on nations will have
increased the intensity and number of their conflicts, to the point where the arsenals of weapons of mass destruction (WMD) now
possessed by some 25 nations, are almost certain to be released. As an example, suppose a starving North Korea {[7]} launches
nuclear weapons upon Japan and South Korea, including U.S. forces there, in a spasmodic suicidal response. Or suppose a desperate
China — whose long-range nuclear missiles (some) can reach the United States — attacks Taiwan. In addition to immediate
responses, the mutual treaties involved in such scenarios will quickly draw other nations into the conflict, escalating it significantly.
Strategic nuclear studies have shown for decades that, under such extreme stress conditions, once a few nukes are launched,
adversaries and potential adversaries are then compelled to launch on perception of preparations by one's adversary. The real legacy
of the MAD concept is this side of the MAD coin that is almost never discussed. Without effective defense, the only chance a nation
has to survive at all is to launch immediate full-bore pre-emptive strikes and try to take out its perceived foes as rapidly and massively
as possible.
As the studies showed, rapid escalation to full WMD exchange occurs. Today, a great percent of the WMD arsenals that will be
unleashed, are already on site within the United States itself {[8]}. The resulting great Armageddon will destroy civilization as we
know it, and perhaps most of the biosphere, at least for many decades.
Kentucky Fellows 08 Murray
Auto Industry DA Page 5 of 32

Uniqueness – slump now (1/2)

Auto industry is slumping, but some will survive


Dow Jones Newswire, 7/2/2008 (Some US Auto-Parts Makers May Weather Industry Downturn,
http://money.cnn.com/news/newsfeeds/articles/djf500/200807021605DOWJONESDJONLINE000605_FORTU
NE5.htm)

DETROIT -(Dow Jones)- A handful of U.S. automotive parts makers are in a good position to weather a brutal stretch for the
American auto industry, even as many manufacturers and suppliers slash production and lay off workers at a time of deepening losses.
The same forces driving losses at Detroit's Big Three automakers - sluggish U.S. sales and a dramatic shift away from high-margin
pickup trucks and sport- utility vehicles - are dragging down much of the parts making industry.
Shares of key automotive suppliers such as American Axle & Manufacturing Holdings Inc. (AXL), Lear Corp. (LEA), Visteon Corp.
(VC) have plummeted in recent weeks as U.S.-based auto makers cut shifts and idle plants in response to declining demand.
But companies that managed to widen their reach beyond Detroit-built trucks are having better luck surviving the downturn.
ArvinMeritor Inc. (ARM) on Tuesday projected 20% revenue growth for its just-concluded fiscal third quarter, mainly on the strength
of international sales. Johnson Controls Inc. ( JCI) and BorgWarner Inc. (BWA) also have been signaled by analysts who predict the
companies will fare better than most.
"Nobody is going to do well, but some people are definitely going to do less badly," said Shelly Lombard, a high-yield analyst with
Gimme Credit. "Anybody who has more international exposure, more products and more diversity is going to be in a better position."

GM is on the brink now but looking to increase


Katie Merx, 7/3/2008 (Free Press Business Writer, Dire outlook sends GM shares to 54-year low,
http://www.freep.com/apps/pbcs.dll/article?AID=/20080703/BUSINESS01/807030426)

General Motors Corp. stock closed below $10 per share Wednesday -- its lowest level since Dwight Eisenhower was president, power
brakes were new and the Bel Air was the automaker's hot new car -- after dreadful June auto sales led one analyst to write that
"bankruptcy is not impossible."
The analysis sent GM shares tumbling to a $9.98 close, down 15.06% for the day and its lowest close since Sept. 13, 1954, according
to the Center for Research in Security Prices at the University of Chicago.
Other automakers' and suppliers' shares also fell, with Ford Motor Co.'s closing down 7.43% to $4.36 per share.
GM's fall came after Merrill Lynch analyst John Murphy lowered his outlook for the stock to $7 per share, said GM may need to raise
as much as $15 billion to remain solvent and evoked the specter of bankruptcy. Murphy released his note to investors one day after the
announcement of an 18.3% drop in U.S. auto sales for June from the same month a year ago. GM sales fell 18.2%.
"The key change in our outlook is a much lower forecast for U.S. auto sales that is driving a higher cash burn necessitating a much
larger capital raise than the market is currently anticipating," Murphy wrote. "Furthermore, we believe there is potential downside in
the stock below $7 and that bankruptcy is not impossible if the market continues to deteriorate and significant incremental capital is
not raised."
GM continues to forecast that auto sales will improve slightly by year's end and in 2009. GM predicts that 2008 U.S. industry light-
vehicle sales will reach about 14.7 million, dramatically down from 2007 sales of 16.2 million.

Industry is hurting now


The Wall Street Journal, 7/3/2008 (Stocks Battle to Regain Ground,
http://online.wsj.com/article/SB121509535364726451.html?mod=googlenews_wsj)

NEW YORK -- The Dow Jones Industrial Average moved into a bear market this week, though it finished Thursday with a bounce, as
General Motors' stock tried to fight back from its lowest levels since the 1950s. With the Standard & Poor's 500 on the brink of a bear
market and on Thursday hitting its lowest intraday mark in more than a year, the only question now is how low stocks will go before
the next bull move starts. On Thursday, the economic outlook darkened yet again after reports showing that unemployment remained
at an elevated 5.5% rate in June, while other data showed contraction of the services sector.
Kentucky Fellows 08 Murray
Auto Industry DA Page 6 of 32

Uniqueness – slump now (2/2)


U.S. auto industry is losing competition overseas
BBC News, 6/11/2008 (Globalising the car industry,
http://www.autoindia.com/Column/ColumnArticle.aspx?id=563)

Only the most competitive, and most nimble, will survive in the new globally competitive market. There are no longer any protected
home markets (outside Japan and South Korea), and the fierce competition means that no one is able to dominate in the way that GM
dominated the U.S market for most of this century.
According to Ford's North American President Mark Fields, "There is no longer anywhere to hide. We are competing in every market
and every segment."
The competition is even tougher outside the U.S. In Europe, the market leader, Volkswagen (VW), has only a 14% market share. In
China, VW's share of the market declined from 60% to 10% in the last decade, the same size as GM (both companies operate joint
ventures).
GM's President for Asia-Pacific, Nick Reilly, says that the increasing competition is making it tough for GM to make money in China.
And the market leaders are under threat as never before.
In Europe, Japanese and Korean manufacturers such as Hyundai and Toyota are ramping up production, representing a real threat to
the smaller mass-market producers such as Fiat, Renault and Peugeot-Citroen.
In China and India, Western companies are under challenge, not only from Asian rivals but also from a proliferation of home-grown
companies with global aspirations.

GM is tanking – gas prices


Oakland Press, 6/19/2008 (Firm CEO: Auto outlook not so bad,
http://www.theoaklandpress.com/stories/061908/bus_20080619211.shtml)

General Motors Corp. shares fell to a 52-week low Wednesday after a Deutsche Bank analyst lowered his sales forecast through 2010
and said the automaker will need further restructuring as customers continue to abandon its trucks and sport utility vehicles in favor of
smaller cars.
GM shares fell nearly 7 percent to $14.75 per share in morning trading before rallying to $14.89 in the late afternoon. The previous
52-week low was $15.50 per share.
Ford Motor Co. shares also fell 5 percent to $6.22 in afternoon trading, while shares of AutoNation Inc., the country's largest auto
retailer, fell 5 percent to $12.80.
Deutsche Bank analyst Rod Lache said in a note to investors that he expects total U.S. sales to fall to 14.5 million in 2008 from his
previous estimate of 14.9 million. That's down from 17 million as recently as 2005. Lache cited the weak economy and high gas prices
as well as falling residual values which are making it tougher to trade in vehicles.

GM is crashing - smaller than Mattel


Bloomber.com 7/3/2008 (GM May Sell Mini-Cars to Fuel-Conscious U.S. Buyers,
http://www.bloomberg.com/apps/news?pid=20601087&sid=ayOBVrTWkn0E&refer=home)

GM, turning 100 this year, has few options to re-inventing itself. The company reported its largest annual loss in 2007, $38.7 billion,
after a tax accounting change, and hasn't had a profitable year since 2004. The carmaker's U.S. market share hovers at the lowest level
since 1925, and last year GM was 3,000 cars away from being dethroned by Toyota Motor Corp. as the world's largest automaker.
Smaller Than Mattel
The company's current market value is smaller than that of Mattel Inc., maker of Matchbox cars, and a 10th of what it was in 2000. A
Merrill Lynch analyst said yesterday that a GM ``bankruptcy is not impossible if the market continues to deteriorate.''
Kentucky Fellows 08 Murray
Auto Industry DA Page 7 of 32

Uniqueness – slowly recovering

Auto Industry is slowly recovering


The Wall Street Journal, 7/3/2008 (Stocks Battle to Regain Ground,
http://online.wsj.com/article/SB121509535364726451.html?mod=googlenews_wsj)

Shares of GM finished Thursday's truncated session at 10.12, up 14 cents, or 1.4%, taking back a modicum of its 15% loss
Wednesday. In sales data Tuesday, Ford Motor and GM revealed the extent to which the once-insatiable hunger for their sports utility
vehicle and pickup truck lines had succumbed to the spike in oil prices. Ford Motor rose 6 cents, or 1.4%, to 4.42.

US auto sales won't rebound until 2010


Reuters, 7/2/2008 (Analysts see US auto recovery delayed beyond 2009,
http://www.guardian.co.uk/business/feedarticle/7625772)

DETROIT, July 2 (Reuters) - A deepening slump in U.S. auto sales this year has already forced investors and automakers to abandon
hopes for a second-half recovery. Now some analysts are painting an even more dire picture for 2009.
The world's largest auto market is reeling from an unprecedented combination of record gas prices, tighter credit and a housing market
collapse.
Investors will have to wait until 2010 for signs of a rebound, according to a wave of bearish analyst forecasts issued on Wednesday.

Sales strong but soon to slow


Car Central, 7/3/3008 (Car industry continues strong sales despite rising fuel prices, interest rates,
http://www.carcentral.com.au/200807031858/industry/car-industry-continues-strong-sales-despite-rising-fuel-
prices-interest-rates.html)

Sales in June continue upward trend, though second half may slow
Total industry volume for June is up 20.2% over last month’s sales figures, with seasonally adjusted figures showing a 6.3% increase
in sales. Compared to 2007, this year’s June sales figures improved by 1.4% to 106,541 cars sold. That total is also the highest number
of cars ever sold in any month in Australian history. The strong June sales put the market ahead of pace for hitting the million mark
once again, after doing so for the first time last year.
Some caution is warranted, however, with even the FCAI’s Andrew McKellar cautioning that global economic conditions and market
forces like interest rates and petrol prices may yet slow the apparently unflappable local car market.
Kentucky Fellows 08 Murray
Auto Industry DA Page 8 of 32

Uniqueness – investor pullout now

Investors pulling out of alternative energy now


The Independent, 6/25/2008 (The eco-crunch: Can Britain still afford to go green?,
http://www.independent.co.uk/environment/green-living/the-ecocrunch-can-britain-still-afford-to-go-green-
853415.html)

Yet does that speak to economic reality? Certainly, investors are steering away from alternative-energy projects. In the first quarter of
this year, global investments in clean energy were down nearly a third to $2.7bn (£1.37bn). Private equity investment was down nearly
two-thirds, according to the analyst New Energy Finance. The market for solar energy remains strong, thanks to steady technological
improvements. But wind-power investments have dipped and biofuels have fallen following the controversy about their role in the
global food spike. It may get worse. Shell recently pulled out of the world's biggest planned wind farm, the London Array, after
booming crude prices made oil far more attractive than long-term investment in renewables. Elsewhere, risk-averse investors are
looking for swifter returns and shying away from green projects. But there are important indicators pointing in the opposite direction.
Pessimists predicted that organic food would take a knock because of the gloomy economic talk. But there is no sign of that. On the
contrary, we are becoming greener in our eating habits.
Kentucky Fellows 08 Murray
Auto Industry DA Page 9 of 32

Uniqueness – green market shift now

Shift in the market towards green cars now


BBC News, 6/11/2008 (Globalising the car industry,
http://www.autoindia.com/Column/ColumnArticle.aspx?id=563)

But attitudes are changing, even in the U.S, as consumers become more consciousness about environmental issues. Sales of hybrid
(petrol-electric) cars are growing fast - and Toyota and Honda are rolling out hybrids across their entire range.
Tough new ceilings on pollution and fuel efficiency standards are being introduced in both the U.S and Europe, despite protests from
the car industry.
High fuel prices - and high taxes on petrol - are discouraging consumers from buying the large, fuel-guzzling SUVs.
All the major car manufacturers now recognise the trend. Bill Ford says that "society is now clamouring for this approach" and Ford
has "recognised the shift in the marketplace" with its 'Greener Miles' approach.
Kentucky Fellows 08 Murray
Auto Industry DA Page 10 of 32

Uniqueness – green coming in future

More fuel efficient vehicles can be fully deployed by 2020, ensuring energy security and decreasing the
price of gasoline
Common Dreams News Center, 7/2/2008 ('Out of Touch' Auto Industry Asks for Weaker Fuel Economy
Standards, http://www.commondreams.org/news2008/0702-09.htm)

According to UCS calculations, achieving just the minimum 35 miles-per-gallon (mpg) fleet-wide average by 2020 would bolster the
auto industry and the economy. The standards would cut oil use by 1.1 million barrels a day. For consumers, that is akin to cutting the
cost of gasoline at today's prices by more than a dollar per gallon. Rather than boosting oil industry profits, drivers would spend those
fuel savings locally, strengthening local economies, Kliesch explained. Further, producing fuel-efficient technologies and vehicles
would generate green, domestic jobs. According to a UCS analysis, achieving a 35-mpg fleet-wide average would create 149,000 new
jobs nationwide in 2020.
"The automakers should produce cars and light trucks that help, not harm, American drivers and dealerships," Kliesch said. "We need
more choices in our daily lives that involve using substantially less oil. Building vehicles that go farther on a gallon of gas is the single
best way to strengthen our energy security, cut pollution, and save consumers money. We need the automakers on our side."
The energy bill enacted in December directed NHTSA, an agency in the Department of Transportation, to require automakers to go
beyond 35 mpg if they can achieve a higher "maximum feasible" fuel economy. When NHTSA sets fuel economy standards, it
balances the cost to consumers for fuel-saving technology in new vehicles with the savings from reduced gasoline consumption, as
well as benefits to society, including reducing global warming pollution and strengthening energy security. One of UCS's objections to
the NHTSA draft rule is that is uses an extremely low estimate for the cost of gas, approximately $2.50 a gallon or less between 2011
and 2030 (in 2007 dollars).
According to a recent UCS report, NHTSA could set cost-effective fleet average fuel economy standards approaching 40 mpg by
2020, a target achievable even without hybrid technology. With a modest 25 percent hybrid market share in 2020, a fleet average fuel
economy of 42 mpg could be achieved, while increased sales of fuel-efficient hybrids could push the average even higher.

Switch from gasoline is stalled - high cost of development


Cape Times, 6/24/2008 (Time to kick the internal combustion habit,
http://www.iol.co.za/index.php?set_id=1&click_id=31&art_id=vn20080624054625374C736912)

A tank of standard, US corn biofuel blend, called E10, contains enough calories to sustain an adult man for 11 days. That underlines
the problem of using food to make car fuel while 850-million people in the world are hungry.
Limited scope to improve global crop yields will limit such "first generation" biofuels. Further off, sustainable biofuels which come
from algae or woodchips and don't compete with food, may reach ten percent of US road fuel by 2022.
While some experts say that cars propelled by hydrogen fuel cells, which rely on the conversion of hydrogen and oxygen into water
and which don't have harmful emissions, are promising, the technology is still in its infancy.
Honda began production on June 16 of a new fuel-cell car, the FCX Clarity, but has plans to sell only 200 in the US and Japan in the
next three years.
The biggest hurdles for proliferation of hydrogen cell vehicles are a lack of fuelling stations and the high cost of development.
Kentucky Fellows 08 Murray
Auto Industry DA Page 11 of 32

Link – innovation

It takes years for new vehicle development - surplus of old models ensures a lack of innovation
The New York Times, 6/5/2008 (Detroit Automakers Compete for a Vanishing Truck Market,
http://www.nytimes.com/2008/06/05/business/05auto.html?ref=business)

A Chrysler spokesman, Rick Deneau, said the company planned to proceed with its introduction of the Ram as scheduled.
“But we don’t have blinders on about the market,” Mr. Deneau said. “The bottom line is you plan these new vehicles years and years
in advance. The best we can do is offer the best Ram we can make, and hope to make the best of a tough situation.”
Before the new F-series and Ram go on sale, Ford and Chrysler need to clear an abundance of their current models off dealers’ lots.
On Tuesday, Ford started an “employee pricing” sale on remaining 2008 F-series trucks.
Ms. Caldwell, the Edmunds analyst, said the companies could undermine their new trucks if they made the old models too attractive
with big discounts.
“There’s so few buyers out there, that it’s going to be hard to compete against these old trucks,” she said. “There’s a lot of risk
involved.”
Kentucky Fellows 08 Murray
Auto Industry DA Page 12 of 32

Internal Link – efficiency key

Fuel efficient cars are key to surviving the auto industry slump
Dow Jones Newswire, 7/2/2008 (Some US Auto-Parts Makers May Weather Industry Downturn,
http://money.cnn.com/news/newsfeeds/articles/djf500/200807021605DOWJONESDJONLINE000605_FORTU
NE5.htm)

Opportunities also exist for new business with Honda Motor Co. (HMC), as the Japanese automaker leverages a lineup of fuel-
efficient cars increasingly attractive to consumers grappling with $4-per-gallon gasoline. Honda was the only major automaker to post
a U.S. sales increase in June. The company, straying from the norm for Asian auto makers, is looking to tap more U.S.-based parts
makers to supply its growing North American operations, Gillette said.
"Literally, anybody participating in fuel economy will do better in this environment," Gillette said.
North American suppliers have worked to retrench in recent years in the face of soaring materials costs and deep cutbacks by their
biggest customers.
While many companies still rely heavily on Detroit's auto makers, several have succeeded in diversifying their product offerings and
geographic presence.
Where American Axle relies on the Detroit Three for 90% of its revenue, those companies are responsible for less than 20% of the
profits at Johnson Controls, ArvinMeritor and BorgWarner.
American Axle shares fell 12.9% to $7.61 on Wednesday, while Johnson Controls fell 2.8% to $28.35 and BorgWarner fell 4.8% to
$42.91. Johnson Controls produces interior electronics and batteries while BorgWarner makes turbochargers that increase fuel
efficiency.
Citigroup Analyst Itay Michaeli, in a research note, praised BorgWarner's " superior growth and margin profile, which is supported by
secular demand for its products that help improve fuel economy and reduce emissions."
Kentucky Fellows 08 Murray
Auto Industry DA Page 13 of 32

Internal link – Honda is sweet

Failure to compete means Honda fills in after collapse


John McKee, 7/3/2008 (Business consultant, mentor, success; Are US managers doomed to be water boys?,
http://blogs.techrepublic.com.com/tech-manager/?p=545)

In a column in the June 30 issue of Forbes Magazine, auto industry guru Jerry Flint observed that the US auto industry is so shaky that
a total collapse is now a very real possibility.
He noted parallels to the British auto industry, where once-profitable companies went down or were acquired by overseas
organizations. The result, he said, was that although cars are still being assembled in Britain, all the good paying jobs and important
management roles go to those from other countries. Only the low-paying work is given to the “locals.”
The Brits, he said, have been relegated to the role of water boys. And the same is likely here. His concerns seem to be reinforced by a
July 1 report on combined auto sales in CNN/Money. That report indicated June was perhaps the worst sales month since tracking
began years ago.
What’s more, General Motors, once the world’s biggest producer of cars with over a dozen car brands, is now valued at about $6B
while Honda, with only two brands, is now worth over $11B.

Honda is leading the switch to green cards


Wall Street Journal, 6/16/2008 (Honda CEO Vies For Green Mantle,
http://online.wsj.com/article/SB121356401528375665.html?mod=hps_us_inside_today)

Now 63-year-old Mr. Fukui, who has led the company for five years, is charting Honda Motor's efforts to be the greenest of the
world's auto makers
As soaring gasoline prices boost demand for more fuel-efficient vehicles, the global auto giants are battling to define the next
generation of automobiles with a blitz of eco-friendly vehicle launches, new technologies and campaigns to show off their green
credentials.
Monday at a ceremony in Japan, Mr. Fukui is scheduled to roll out a new hydrogen-powered fuel-cell vehicle, the FCX Clarity, one of
the world's most-advanced green vehicles, which Honda hopes will bring fuel-cell technology into the mainstream.

Honda is outselling US now - fuel efficiency


The New York Times, 6/5/2008 (Detroit Automakers Compete for a Vanishing Truck Market,
http://www.nytimes.com/2008/06/05/business/05auto.html?ref=business)

This winter, when Chrysler paraded 120 Texas longhorns outside the Detroit auto show to promote its 2009 Dodge Ram, and Ford
brought in the country superstar Toby Keith to unveil its new F-series truck, full-size pickups accounted for 13 percent of the United
States vehicle market. They were just 9 percent of the market in May, when for the first time since 1992 the country’s top-selling
vehicle was a car — the Honda Civic compact sedan — rather than a truck.
Kentucky Fellows 08 Murray
Auto Industry DA Page 14 of 32

Internal link – crowd out

Transition to fuel efficient vehicles means the international market is crowding out the US
Infibeam.com, 7/5/2008 (International Automobile Dealers announce June sales,
http://www.infibeam.com/blog/news/2008/07/05/international_automobile_dealers_announce_june_sales.html)

"In light of rising gas prices and a sluggish economy, international nameplate dealers are delivering vehicles that meet the evolving
needs of the driving public," said Cody Lusk, president of AIADA. "The international industry has increased its market share as
consumers make a transition from large trucks to smaller vehicles. Due to its emphasis on fuel efficiency and advanced technologies
the international industry will continue its growth within the U.S. market."
International nameplates claimed a majority share of the car market in June, with 54.2 percent of the market versus 49.8 percent at this
time last year. International brands also sold 100,358 more vehicles than the domestic brands this month, despite an overall downturn
within the industry. Asian brands have a 46.2 percent share of the market, Europeans have an 8.0 percent share, and domestic brands
finish the month off with 45.8 percent. The second quarter of 2008 is up slightly for the international industry with 1,783,003 cars sold
in the first quarter of the year and 2,076,918 sold in the second quarter.
Kentucky Fellows 08 Murray
Auto Industry DA Page 15 of 32

Internal link – no shift now

American manufacturers are still major truck producers


The New York Times, 6/5/2008 (Detroit Automakers Compete for a Vanishing Truck Market,
http://www.nytimes.com/2008/06/05/business/05auto.html?ref=business)

The truck segment used to be a cash cow for the Detroit automakers, whose corporate identities once rested on the slogans they used
to sell pickups, like “built Ford tough,” and “like a rock” for Chevrolet. Analysts say each pickup carries a profit margin of as much as
$10,000, much greater than the margin on smaller vehicles.
Three years ago, 3 out of every 10 vehicles that Ford’s three domestic brands sold in the United States were F-series trucks; on an
annual basis, the F-series has been the nation’s best-selling vehicle since 1976. Last month, the F-series accounted for 21 percent of
Ford’s sales. Dealers say the only people still buying trucks in large numbers are those who need them for work, like building
contractors.
“You aren’t going to have the guys who get them as a macho thing anymore,” said John Hutchinson, a salesman at Northpoint Ford in
Milwaukee.
But a weak housing market in much of the country and plummeting prices for used trucks, caused by the decline in demand for them,
have discouraged many contractors from upgrading to a new pickup. Mr. Hutchinson said a customer came in last week to trade in his
three-quarter-ton F-250 for a smaller F-150 but backed out upon learning that the value of his F-250 was half as much as he owed on
it.
Kentucky Fellows 08 Murray
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Internal Link – employment (1/2)

Unemployment expected to decrease now but a short-term increase would destroy the economy
Herald Tribune, 7/2/2008 ( Forecast for U.S. workers: Gloom,
http://www.iht.com/articles/2008/07/02/business/02jobs.php)

On Thursday, the Labor Department will release its snapshot of the job market for June. Economists generally expect the report to
show 60,000 more jobs lost, marking the sixth consecutive month of decline.
But many anticipate the unemployment rate will nudge down a little bit, swinging back from an abrupt climb that could have been
exaggerated by survey glitches in the previous month, when the rate jumped by half a percentage point — the sharpest one-month
spike in 22 years.
If the unemployment rate were to hold steady or rise, that would likely spook markets, underscoring the impact of the economic
slowdown.
"Slowing wage growth and falling employment is absolutely toxic if your business is selling anything to consumers," said Ian
Shepherdson, chief United States economist for High Frequency Economics.

Collapse of the auto industry means millions of jobs and billions of dollars out of the economy
McAlinden et al 2003 (Sean P. McAlinden, Ph.D. Kim Hill, MPP, Bernard Swiecki; "Economic Contribution of
the Automotive Industry to the U.S. Economy – An Update", http://www.cargroup.org/pdfs/Alliance-Final.pdf)

In summary, the employment contribution currently associated with total automotive industry activity in the United States is estimated
to be about 3.5 million jobs in the private sector attributable to the industry directly and its suppliers, and 6.6 million when all spin-off
effects are included. The compensation contribution is estimated to be about $152 billion attributable to the industry directly and its
suppliers, and $243 billion when all spin-off effects are included.
Kentucky Fellows 08 Murray
Auto Industry DA Page 17 of 32

Internal link – employment (2/2)

Auto industry is key to lowering unemployment


McAlinden et al 2003 (Sean P. McAlinden, Ph.D. Kim Hill, MPP, Bernard Swiecki; "Economic Contribution of
the Automotive Industry to the U.S. Economy – An Update", http://www.cargroup.org/pdfs/Alliance-Final.pdf)

Employment is always a major factor when measuring the significance of any economic activity. Employment in motor vehicle
manufacturing is tabulated by the U.S. Department of Labor’s Bureau of Labor Statistics for the three-digit industrial classification
SIC 371: the motor vehicle and motor vehicle equipment industry. The data are based on employer establishment surveys. This
industry classification, however, does not include all employment generated by auto parts manufacturing. These employment figures
do cover vehicle assembly and most major component manufacturing. Figure 1.7 tells an interesting story. Employment in SIC 371 in
1999 was equal to the industry’s all-time record in 1978 of one million employees, and thus has now fully recovered from its formerly
depressed levels. Recent levels of SIC 371 employment of 947,000 in 2001 and 912,000 in 2002 are remarkable during a U.S.
recession – especially when compared to trough employment levels in 1982 and 1992. The unemployment rate is also a strong
indicator of national well-being. As figure 1.8 illustrates, the measured unemployment rate for those who report employment in the
U.S. automotive industry has consistently been lower than the overall U.S. rate of unemployment since 1993 except for one year. In
1999, for example, the national unemployment rate was 4.2 percent compared with only 2.9 percent in the automotive industry.
Although the industry unemployment rate did rise slightly above the national rate in 2001, it has clearly fallen below the overall rate in
2002 – resting at 5.4 percent compared to 5.8 percent for the nation. Clearly, the auto industry has contributed to the lower rates of
U.S. unemployment during the recent national recovery.

Auto industry responsible for millions of jobs


McAlinden et al 2003 (Sean P. McAlinden, Ph.D. Kim Hill, MPP, Bernard Swiecki; "Economic Contribution of
the Automotive Industry to the U.S. Economy – An Update", http://www.cargroup.org/pdfs/Alliance-Final.pdf)

Our 2001 study produced summary estimates of the employment and income contributions of automotive manufacturing to the private
sector of the U.S. economy in 1998. These estimates are shown in table 1.1.4 According to the data compiled from the survey of motor
vehicle firms (reported in appendix B of our 2001 study),5, 621,255 workers were employed in automotive manufacturing nationwide
in 1998. This is shown as direct employment in table 1.1. Indirect employment from these automotive manufacturing activities (i.e.,
automotive suppliers) is estimated to be 1,796,000 jobs. The sum of direct and indirect jobs equals 2,417,300 private sector jobs. The
resulting number of jobs created (direct plus indirect) for every direct job introduced constitutes the “employment multiplier.” In this
case, the employment multiplier is 3.9. This employment multiplier can be interpreted in two ways: (1) there are 3.9 times as many
jobs generated as there are direct jobs (2,417,300 ¸ 621,300 = 3.9), or (2) there are 2.9 indirect jobs generated for every direct job (1
direct job + 2.9 indirect jobs = 3.9 jobs).
Kentucky Fellows 08 Murray
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Internal link – key to economy

Auto industry key is a major sector of the economy – employee value and compensation
McAlinden et al 2003 (Sean P. McAlinden, Ph.D. Kim Hill, MPP, Bernard Swiecki; "Economic Contribution of
the Automotive Industry to the U.S. Economy – An Update", http://www.cargroup.org/pdfs/Alliance-Final.pdf)

The productivity of the automotive industry can be compared with other U.S. industries in terms of value added per employee. Value
added includes the sum of profits, rent, interest, and labor compensation paid within the industry. It is thus a measure of the actual
value produced by an industry. As shown in figure 1.9, the motor vehicle manufacturing industry ranked third among major
manufacturing industry groups in terms of value added per employee. The industry’s value added of $292,000 per worker was 143
percent higher than the overall value-added ratio for U.S. manufacturing ($120,000). Only two major industries exceeded the motor
vehicle industry’s level of productivity (beverage and tobacco products and petroleum and coal products). These two industries, of
course, employed far fewer workers in 2001. In fact, the average job in the United States produced $73,000 in 2000 (GDP/total
employment). Motor vehicle company employees produced exactly four times as much value as the average U.S. employee in 2000.
To put the employment and compensation contributions in some context, these contributions are represented in table 1.1 as a share of
the total private sector economy for the United States. The economic contribution of direct and indirect automotive manufacturing
activities in 1998 represents 1.8 percent of the private sector jobs and 2.6 percent of the private sector compensation in the U.S.
economy. The compensation share is greater than the employment share because compensation in the auto industry is higher on
average than in other industries.

Auto Industry key to growth


McAlinden et al 2003 (Sean P. McAlinden, Ph.D. Kim Hill, MPP, Bernard Swiecki; "Economic Contribution of
the Automotive Industry to the U.S. Economy – An Update", http://www.cargroup.org/pdfs/Alliance-Final.pdf)

This overview so far has investigated a number of well-known measures of the contribution of the automotive industry to the U.S.
economy. We have shown the U.S. industry to be the largest automotive industry in the world. It is an industry that has matched its
peak historical employment and maintained its share of GDP. In recent years, the industry has contributed to higher rates of economic
growth and lower rates of U.S. unemployment. Finally, the industry ranks among the top industries in the nation in terms of R&D
spending and the compensation of employees. Yet this overview does not fully cover the widespread linkages the automotive industry
maintains with many other large manufacturing and service industries in the United States. A full accounting of the presence of the
automotive industry in the economy must estimate the industry’s creation of jobs and income throughout the U.S. economy. This
involves the estimation of jobs and income created in the production of commodities and services supplied to the industry by other
industries; and jobs and income created as a result of spending by industry employees on products and services produced by other
industries.

US auto industry key to the economy


McAlinden et al 2003 (Sean P. McAlinden, Ph.D. Kim Hill, MPP, Bernard Swiecki; "Economic Contribution of
the Automotive Industry to the U.S. Economy – An Update", http://www.cargroup.org/pdfs/Alliance-Final.pdf)
The U.S. automotive industry is still the largest automotive industry in the world. No other single industry is linked to as much of U.S.
manufacturing or generates as much retail business and employment. The industry owes its relative size and importance, of course, to
the popular use of its product, the motor vehicle. This fact has remained constant despite the overall downturn in U.S. economic
activity in 2001. Figure 1.1 ranks the largest national markets in 2002 in terms of total vehicle sales. The U.S. market, at 16.8 million
vehicle sales, was almost three times larger than the next largest market in Japan. Figure 1.2 ranks the largest vehicle-producing
nations in 2002 in terms of vehicle production. The U.S. industry produced 21 percent more vehicles than the next largest vehicle
industry in Japan.
Kentucky Fellows 08 Murray
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Internal link – U.S. econ => Global

US economic collapse will spread globally, specifically China and Japan


Walter Russell Mead, Henry A. Kissinger Senior Fellow for U.S. Foreign Policy at the Council on Foreign
Relations, 2004, (“America’s Sticky Power”, lexis)
Similarly, in the last 60 years, as foreigners have acquired a greater value in the United States-government and private bonds, direct
and portfolio private investments-more and more of them have acquired an interest in maintaining the strength of the U.S.-led system.
A collapse of the U.S. economy and the ruin of the dollar would do more than dent the prosperity of the United States. Without their
best customer, countries including China and Japan would fall into depressions. The financial strength of every country would be
severely shaken should the United States collapse. Under those circumstances, debt becomes a strength, not a weakness, and other
countries fear to break with the United States because they need its market and own its securities. Of course, pressed too far, a large
national debt can turn from a source of strength to a crippling liability, and the United States must continue to justify other countries'
faith by maintaining its long-term record of meeting its financial obligations. But, like Samson in the temple of the Philistines, a
collapsing U.S. economy would inflict enormous, unacceptable damage on the rest of the world. That is sticky power with a
vengeance.

Chinese economic collapse causes multiple nuclear wars.


Depres, 2001 (Former Assistant Secretary of Commerce & Private Consultant,China, the United States, and the Global Economy,
ed. Chen & Wolf)
Nevertheless, America’s main interests in China have been quite constant, namely peace, security, prosperity, and a healthy
environment. Chinese interests in the United States have also been quite constant and largely compatible, notwithstanding sharp
differences over Taiwan, strategic technology transfers, trade, and human rights. Indeed, U.S.-Chinese relations have been consistently
driven by strong common interests in preventing mutually damaging wars in Asia that could involve nuclear weapons; in ensuring
that Taiwan’s relations with the mainland remain peaceful; in sustaining the growth of the U.S., China, and other Asian-Pacific
economies; and, in preserving natural environments that sustain healthy and productive lives.
What happens in China matters to Americans. It affects America’s prosperity. China’s growing economy is a valuable market to
many workers, farmers, and businesses across America, not just to large multinational firms like Boeing, Microsoft, and Motorola, and
it could become much more valuable by opening its markets further. China also affects America’s security. It could either help to
stabilize or destabilize currently peaceful but sometimes tense and dangerous situations in Korea, where U.S. troops are on the front
line; in the Taiwan Straits, where U.S. democratic values and strategic credibility may be at stake; and in nuclear-armed South Asia,
where renewed warfare could lead to terrible consequences. It also affects America’s environment. Indeed, how China meets its
rising energy needs and protects its dwindling habitats will affect the global atmosphere and currently endangered species.
Continues
Great common interests and risks of serious conflicts between the United States and China will keep raising difficult new challenges.
They will require new initiatives for mutually beneficial cooperation and continuous efforts to avoid potentially critical
misunderstandings over unforeseeable events in Taiwan, Korea, Japan, the Persian Gulf, Yugoslavia, or elsewhere. Without doubt,
sustaining China’s economic growth and reinforcing its institutional reforms though greater openness is a winning prescription for
both the United States and China.

And, Japanese economic collapse causes nuclear war.


Elliott, 02 (The Guardian Staff Writer, 2-11, Lexis)
Even so, the west cannot afford to be complacent about what is happening in Japan, unless it intends to use the country as a test case to
explore whether a full-scale depression is less painful now than it was 70 years ago. Action is needed, and quickly because this is an
economy that could soak up some of the world's excess capacity if functioning properly. A strong Japan is not only essential for the
long-term health of the global economy, it is also needed as a counter-weight to the growing power of China. A collapse in the
Japanese economy, which looks ever more likely, would have profound ramifications; some experts believe it could even unleash a
wave of extreme nationalism that would push the country into conflict with its bigger (and nuclear) neighbour.
Kentucky Fellows 08 Murray
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Internal link – U.S. econ => Global

U.S. key - GDP


U.S. News and World Report, 2003 (Show some steel, Mr. Bush,
http://www.usnews.com/usnews/opinion/articles/031124/24dobbs.htm)

The Bush administration may be forced to take further action. The global economy is absolutely dependent on the United States. This
country carries an annual current-account deficit of $481 billion with the rest of the world. Our gross domestic product was more than
$10 trillion in 2002, greater than the next five countries combined. The success or failure of the American economy is more than
important to the rest of the world.

U.S. key - markets


The Toronto Star, 2004 (Preparing for the inevitable U.S.-led correction, lexis)

This is not an idle consideration. The world economy - including the Canadian economy - is highly dependent
on the U.S. economy today. By running its big budget and current account deficits, the United States is acting as
the principle engine of the global economy, serving as a vast market for foreign goods and services. Yet this also
makes the world economy extremely vulnerable to shifts in U.S. circumstances.

US key – spending levels


William K Tabb, Prof @ Queens College, 5/11/2006 (Graduate Center of the University of New York, Trouble,
Trouble, Debt, and Bubble, http://www.monthlyreview.org/0506tabb.htm
The questions regarding U.S. macroeconomic policy these days come down to whether the country can keep borrowing. Can
consumers keep spending by increasing their debt level? Can the federal government keep running a large budget deficit without
serious problems developing? Can the U.S. current account deficit keep growing? Will foreigners keep buying government bonds to
cover this growing debt? If the answer is no to such questions, we can expect serious trouble and not just for the United States but for
the rest of the world, which has grown used to the United States as the consumer of last resort. The United States buys 50 percent
more than it sells overseas, enough to sink any other economy. In another economy, such a deficit would lead to a severe devaluation
of the currency, sharply inflating the price of imports and forcing the monetary authorities to push interest rates up considerably.
Kentucky Fellows 08 Murray
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Brink - industry

US auto industry on the brink of collapse


BBC News, 6/11/2008 (Globalising the car industry,
http://www.autoindia.com/Column/ColumnArticle.aspx?id=563)

For many years, the model for the global car industry was the United States - the single largest car market in the world. But now the
U.S represents less than one-quarter of the world industry, and its market share will decline further.
The U.S car market has already reached its saturation point.
Stephen D'Arcy of PricewaterhouseCoopers believes all the growth in the global auto industry in the next decade will come from
emerging market countries such as India, China and eastern Europe. And that means the fastest-growing segment in the car industry
will be the small car, the only size that will be affordable to the burgeoning middle classes in these countries.

GM won’t go bankrupt in the status quo


Katie Merx, 7/3/2008 (Free Press Business Writer, Dire outlook sends GM shares to 54-year low,
http://www.freep.com/apps/pbcs.dll/article?AID=/20080703/BUSINESS01/807030426)

"There is so much they can do before bankruptcy, including the selling of assets, suspending the dividend, joint ventures and
management changes," said Argus Research analyst Kevin Tynan. "I wouldn't be surprised to start to see some management
rumblings, shareholders talking about Rick Wagoner and the job he's done, calling for him to go. ...
"But the liquidity position, it would have to get really bad before you get to an actual bankruptcy filing."
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Brink – economy
The economy is at a tipping point
Bill Jamieson, 7/3/2008 (reporter for the scotsman news, Day the giants took a sound beating,
http://news.scotsman.com/latestnews/Day-the-giants-took-a.4249786.jp)

Both the Bank for International Settlements and the International Monetary Fund have warned in the past week that the global
economy is at a "tipping point". Both used this worrying expression in their recent assessments of the global economic outlook. In its
annual report, the BIS says the financial market turmoil is "without precedent in the post-war world".
It adds: "With a significant risk of recession in the US, compounded by sharply rising inflation in many countries, fears are growing
that the global economy might be at some kind of tipping point. These fears are not groundless."
So what's happening? The credit crunch that struck last autumn has triggered a massive de-leveraging through the Western world's
financial system, creating the equivalent of a credit black hole. The BIS is clear as to the cause of this crisis. In stark and outspoken
language, it declares "loans of increasingly poor quality have been made and then sold to the gullible and greedy, the latter often
relying on leverage and short-term funding to further increase their profits".
Kentucky Fellows 08 Murray
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Impact – environment

Economic decline decreases environmental protection


The Independent, 6/25/2008 (The eco-crunch: Can Britain still afford to go green?,
http://www.independent.co.uk/environment/green-living/the-ecocrunch-can-britain-still-afford-to-go-green-
853415.html)

There was a cartoon in Private Eye recently, showing a woman at breakfast reading a headline in the Daily Mail about falling house
prices. "I feel so silly," she says to her husband. "Only a week ago I was sitting right here, worrying about climate change." When the
going gets tough, the environment goes out of the economic window. Such is the received wisdom among many in business and
politics. The logic is clear: protecting the environment is a luxury and it's one most of us just can't afford in an economic downturn.
With oil prices up tenfold in the space of a year, green policies look set to be jettisoned by left, right and centre.
There is evidence everywhere: firms that once trumpeted sustainability initiatives are now talking only about "profitable growth",
"staff retention" and "customer focus", while oil companies have begun digging up tar sands – which produce three times more CO2
than crude oil – to increase supply. Those who oppose the new Manchester congestion charge say the introduction of the scheme when
roads are being blockaded by petrol-price protesters is "an act of political suicide".
There has been, in the words of the leading Oxford economist Professor Dieter Helm, a "shift back to the safe territory of concrete and
jobs". Despite politicians' continuing green rhetoric, he adds, "it is a sad fact that the environment is one of the first things to suffer"
when it comes to actual policy as we tighten our belts in the face of a looming economic slowdown.
Kentucky Fellows 08 Murray
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AT IL turn – auto industry key

Auto industry slump makes pulling out of the recession impossible


Research Unit for Political Economy 2003 ( Real Reasons for the US Invasion: Home Front in Shambles,
http://www.rupe-india.org/34/homefront.html)

It is in times of economic setback that the press returns to earth. The Chicago Tribune recently published a series of articles on the
current crisis, drawing on a wide range of interviews with employers, employees and economic analysts. The first piece in the series is
titled: “The Economics of Glut. Bloated industries put the economy in a bind. Glut is making it harder to shake off the recession.”
(William Neikirk, 15-18/12/02) The article begins: “The world’s auto industry can now produce 20 million more cars than consumers
can buy.” Citing instances also from telecommunications and dot-coms, the Tribune discovers that “economists call the phenomenon
overcapacity.... businesses can produce far more than we need. Supply has simply outstripped demand. When that happens, production
slows, equipment sits idle, costs go up, workers are laid off and investments are postponed. The capacity glut exists on a scale that this
country and many others haven’t seen for decades, and it at least partially explains why it is so difficult for the American economy to
shake off a recession that by all measures seemed mild.”
Kentucky Fellows 08 Murray
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AT: Regulations

Forcing fuel regulations on the auto industry threatens collapse


Fortune Magazine, 5/14/2008 (Automotive Armageddon,
http://money.cnn.com/2008/05/13/news/companies/taylor_epa.fortune/index.htm?postversion=2008051404)

Last year, California decided to extend its rules out to 2020 with new and much tougher standards. The reductions in emissions that it
mandates would require that the average new vehicle be able to propel itself on less than one gallon of gas for every 44 miles traveled.
That may sound attractive to those who paying $4 per gallon at the pump but - since it is 60% stiffer than the current regulations - it
would restrict drivers to tiny vehicles that today they have only passing familiarity with.
Say goodbye to your SUVs, big pickup trucks, and V-8 powered muscle cars. Say hello to the Mini Cooper, Honda (HMC) Fit and
anything that is primarily driven by a battery.
If anybody in the auto industry - either in Detroit or abroad - told you they know how to meet that kind of a standard today with their
whole vehicle lineup, they'd be lying. Automakers are already hard pressed trying to meet the federal mileage standard for 2020 that
only calls for an average of 35 miles per gallon. The Toyota (TM) Prius and couple of other gas electric hybrids can get that kind of
mileage in city driving but nothing else you'd want to drive really comes close.
To enact the tough standards that it wanted, California needed a waiver from the Environmental Protection Agency, which sets auto
emission rules on a national basis. The EPA has granted such waivers in the past; indeed, California had never been denied one.
This time, however, the EPA said no: California would have to follow along with the rest of the country. The EPA ruled that, unlike
smog and diesel fumes, climate change is a global problem, not a state one, and therefore needs a national solution.
Like everything else in politics, the EPA ruling isn't final. Lawsuits are flying from various interested parties in an effort to get it
overturned.
What frightens the auto industry is the question of whether the administration that takes office in January, 2009 will get the EPA to
reverse course.
All three presidential candidates have said that they side with California and would order the EPA to extend a waiver. What happens
after the inauguration is anybody's guess. But the betting in Detroit is that Democrats Obama and Clinton are the most likely to stick
to their guns if elected.
Skirmishing continues on other fronts as well. Automakers have asked the federal courts to declare the action by California and other
states to set their own rules is illegal, unrealistic and could create chaos.
As for the states, they are suing to overturn the EPA decision to deny the waiver.
"What you have is a bunch of scofflaws in the White House," California attorney general Jerry Brown was quoted as saying in the Los
Angeles Times. "[EPA Administrator Robert] Johnson is becoming a stooge in a really pathetic drama that hopefully will not play out
much longer."
The drama may be just beginning. Based on California's current vehicle sales mix, cars and the smallest light trucks will need to
achieve more than 50 miles per gallon on 2020 to met the proposed new fleet standard; larger light trucks will have to achieve 35.2
miles per gallon.
They won't be much like today's. They could be made of aluminum, have plastic windows instead of glass, be propelled by a variety
of powertrains, and cost perhaps $10,000 more than current models.
Worse, the cost of developing and building them could bankrupt the companies that are supposed to supply them.
Kentucky Fellows 08 Murray
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AT government reform/ subsidies

The government can't help us now - tariffs are impossible and subsidies fail
Clifford Winston and Robert W. Crandall, 2005 (Senior Fellows of Economic Studies at the Brookings
institute; "Auto Industry on the Line" http://www.brookings.edu/opinions/2005/0523business_crandall.aspx)

Detroit cannot look to Washington to mask these problems. In 1984, the federal government could slow the imports of cars from
Japan. Today, it cannot slow the imports of Japanese or European cars and trucks from Kentucky, Ohio, Tennessee or Alabama into the
rest of the country without a constitutional amendment to repeal the Commerce Clause.
The federal government tried to help by subsidizing development of new fuel-savings technologies, but this project came up empty
when the U.S. companies used the money on trying — thus far unsuccessfully — to develop electric cars and fuel cells while the
unsubsidized Japanese companies developed hybrid vehicles.
Kentucky Fellows 08 Murray
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AT: Big Cars Key

Foreign makers are competitively producing trucks vans and SUVs in the US
Clifford Winston and Robert W. Crandall, 2005 (Senior Fellows of Economic Studies at the Brookings
institute; "Auto Industry on the Line" http://www.brookings.edu/opinions/2005/0523business_crandall.aspx)

Despite the problems with the relative quality of their vehicles, the U.S. automakers were able to withstand the competition from the
Japanese firms, largely because of the strong U.S. economy since 1985, relatively low gas prices, and a shift in consumer preferences
to SUVs, vans and pickup trucks that happened to be shielded from foreign competition because the United States has had a 25% tariff
on light trucks since the 1960s. Moreover, the Japanese companies were not particularly adroit in developing light trucks because their
home market consumers had little interest in them. In the last few years, however, the Japanese producers have begun to develop
highly competitive trucks, vans and SUVs, and they now produce them in the United States, thereby avoiding the 25% duty. Thus,
even this niche is no longer a safe haven for the U.S. companies.
Kentucky Fellows 08 Murray
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AT: Domestic Market Checks

US makers failing even in the US


Clifford Winston and Robert W. Crandall, 2005 (Senior Fellows of Economic Studies at the Brookings
institute; "Auto Industry on the Line" http://www.brookings.edu/opinions/2005/0523business_crandall.aspx)

American producers now account for only about 56% of U.S. vehicle sales, and their share is falling steadily. Within the next three or
four years, it is possible that foreign companies will produce and sell more vehicles in the United States and Canada than the
American companies do, a result that surely would have been viewed as inconceivable when the Japanese export restraints were
negotiated 20 years ago.

American cars are simply lower quality


Clifford Winston and Robert W. Crandall, 2005 (Senior Fellows of Economic Studies at the Brookings
institute; "Auto Industry on the Line" http://www.brookings.edu/opinions/2005/0523business_crandall.aspx)

If the Japanese and Europeans can produce high-quality vehicles, many in the United States, and can do so profitably, why are the
U.S. companies struggling? In a recent paper, one of us found that the U.S. manufacturers' loss in market share over the past decade
can be explained almost entirely by changes in basic vehicle attributes: price, size, power, operating cost and body type. That is, while
the U.S. manufacturers have improved their vehicles along these lines, they have not narrowed the gap with the Japanese and
European manufacturers. This finding suggests that the American firms face serious problems in product design, engineering and
management-labor relations that they simply have not been able to solve.
Kentucky Fellows 08 Murray
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Oil saves the economy

Oil manufacturing is slowing but exports are holding the economy up


Bloomberg, 7/2/2008 (U.S. Economy: Factory Orders Increase as Energy Demand Gains,
http://www.bloomberg.com/apps/news?pid=20601068&sid=asAF9RAbhFE0&refer=home)

July 2 (Bloomberg) -- Orders placed with U.S. factories rose for a third month in May as the oil-price surge kept refineries busy,
offsetting stagnating demand for equipment and machinery.
Bookings increased 0.6 percent, more than forecast, after a revised 1.3 percent gain the prior month, the Commerce Department said
today in Washington. Fuel and chemicals orders prevented a decline in the total figure.
Growth in the energy industry, along with record exports, may keep manufacturing from a deeper downturn even as consumer
spending slows amid the contraction in credit and the housing slump. A separate report today signaled the economy may have lost jobs
in June for a sixth month.
Manufacturing ``continues to slow but it's not the major concern for the economy,'' said Douglas Porter, deputy chief economist at
BMO Capital Markets in Toronto. ``The export side is holding up.''
Kentucky Fellows 08 Murray
Auto Industry DA Page 30 of 32

Aff – sales strong now

Auto industry strong now - sales prove


Herald Sun, 7/4/2008 (Consumers still drive up the car industry,
http://www.news.com.au/heraldsun/story/0,21985,23965239-664,00.html)
There was no sign of any petrol-driven slump, or a downturn based on falling consumer confidence, although some companies believe
customers could be turning to cars as a reward while they wait to enter -- or re-enter -- the housing market.
The total for June was 106,541, according to official Vfacts figures, good enough to take the half-year result to 542,695 new cars,
trucks and buses.
Both numbers are records, with the monthly total up by 1.4 per cent over June last year and the year-to-date result a 3.5 per cent
improvement over the record rate last year.
Everything is still pointing to a one-million-plus total for 2008, the second time the car business will have gone into seven figures,
with the financial-year result coming in at 1,068,301, almost 65,000 better than the previous financial year. But the head of the Federal
Chamber of Automotive Industries warns of plenty of potholes in the road ahead.

Auto growth rates are fine - aligning with national economy


Herald Sun, 7/4/2008 (Consumers still drive up the car industry,
http://www.news.com.au/heraldsun/story/0,21985,23965239-664,00.html)
"We need to be realistic about the fact that there are still significant challenges through the back half of the year. We need to have one
eye on what is occurring internationally, and the pressures on business and consumer confidence," Andrew McKellar, CEO of the
FCAI, said yesterday.
"The June figures also need to be seen in a broader context. We've come from a situation where the market was growing at about twice
the rate of the national economy . . . we have seen growth rates fall from 8.9 per cent to 3.5 per cent this year. This is much more in
line with growth in the general economy and a much more sustainable position."

Sales strong now


Car Central, 7/3/3008 (Car industry continues strong sales despite rising fuel prices, interest rates,
http://www.carcentral.com.au/200807031858/industry/car-industry-continues-strong-sales-despite-rising-fuel-
prices-interest-rates.html)
Analysts may have forecasted doom and gloom for June car sales, but the official figures tell a different story. Despite rising fuel
prices and climbing interest rates, the car industry has set new records for half-year sales. Business purchases, mid-size SUVs and
luxury cars bought ahead of the July 1 Luxury Car Tax hike deadline are the driving forces behind the rise.
Through the first six months of 2008, over 546,000 new vehicles were sold, a rise of 18,319 or 3.5% over the half-year tally in 2007,
which itself was a record year for total sales volume. Much of the continued strength in vehicle sales has been driven by business
customers. Undeterred by the adverse economic conditions, companies have been growing and purchasing new vehicles to satisfy
their needs.
Fiscal year 2007-2008 sales figures also set a new record at 1,068,301 total vehicles sold, a rise of over 64,000 sales beyond last year’s
record figures.

SUV sales strong and climbing


Car Central, 7/3/3008 (Car industry continues strong sales despite rising fuel prices, interest rates,
http://www.carcentral.com.au/200807031858/industry/car-industry-continues-strong-sales-despite-rising-fuel-
prices-interest-rates.html)
SUV sales strong despite fuel price complaints
Talk among industry officials and leading politicians about preparing for the shift in demand toward smaller, more fuel efficient
vehicles is in vogue, but the VFACTS reports indicate medium-size SUVs are selling better than ever, even with petrol headed above
$1.70 per litre in many cities.
In fact, mid-size SUVs saw the largest growth of any segment in June, rising 18.5% in sales to 6,662 units sold. Nevertheless, small
car sales are growing as well, though more slowly. At 4.6% increase among small cars compared to a rise of 12.0% in two-wheel drive
cab-chassis utes, however, the figures clearly reflect the influence of the business sector’s purchases.
Kentucky Fellows 08 Murray
Auto Industry DA Page 31 of 32

Aff – recession won’t happen

Recession won't happen and if it does it will be severely limited - prefer this evidence as it takes their
claims into account
Times Online, 2008 (Recession unlikely if US economy gets through next two crucial months,
http://business.timesonline.co.uk/tol/business/columnists/article3694545.ece)

Apart from the lack of statistical evidence (so far) of a recession already mentioned, there are three other reasons for continuing to
resist the consensus view.
First, the occurrence of a severe financial crisis is not, in itself, a sufficient reason for expecting a recession.
In fact, there have been severe financial crises that did not lead to recessions in the middle of every previous economic cycle: for
example, the Latin American defaults of 1984, the stock market crash of 1987 and the savings and loan and housing collapse of 1988-
89 and the Mexican peso, Asian and Russian crises of 1995-98.
A second reason why an American recession will probably be avoided - or, if it does occur, will be extremely brief - is that powerful
expansionary forces are about to come into play in the US economy in the months ahead.
From the second week of May onwards, every American household will receive tax rebate cheques of between $600 (£300) and
$2,000. As a result, personal disposable income will grow at an annualised rate of well over 10 per cent in the third quarter of this
year.
Even if only half this money is spent, US consumption will therefore be guaranteed to grow by at least 3 per cent in the third and
fourth quarters. And beyond that, the lagged effects of the Fed's recent monetary easing will kick in from the start of 2009.
This is why Mr. Bernanke could afford to state so confidently on Wednesday that the US economy would return to trend or above-
trend growth by early 2009.
Thirdly, there is the US housing market.
Financial markets imply a further decline of about 20 per cent in US house prices, but financial markets are sometimes wrong (as must
surely be obvious by now).
US house prices have already fallen almost 15 per cent from their peak and as a result property in America is no longer expensive in
relation to average incomes.
In fact, the ratio of average house prices to personal disposable incomes is now 5 per cent below its 40-year average and only 9 per
cent above the record low it reached in 1990 and again in 1995.
Given that disposable incomes are rising at about 6 per cent annually, the housing valuations would fall to a new all-time low within
18 months or so, even if there were no further decline in house prices from now on.
And the last time American homes were as cheap as they are today in relation to disposable incomes, interest rates were much higher.
For example, in 1990 and 1995, when house price to income ratios were last at about present levels, standard 30-year US mortgage
rates were 10 per cent and 8.5 per cent respectively.
Today, the corresponding rate is 6 per cent. As a result, affordability indices that take both interest rates and incomes into account
show US property to be very good value already.
For example, the National Association of Realtors' composite affordability index stands at 135, compared with a record high of 140.8
reached in 1999, at the start of the recent housing boom.
After a few more months of falling house prices or rising disposable incomes, American housing will start to look irresistibly cheap.
Kentucky Fellows 08 Murray
Auto Industry DA Page 32 of 32

Aff – industry resilient

No impact - the auto industry is resilient


McAlinden et al 2003 (Sean P. McAlinden, Ph.D. Kim Hill, MPP, Bernard Swiecki; "Economic Contribution of
the Automotive Industry to the U.S. Economy – An Update", http://www.cargroup.org/pdfs/Alliance-Final.pdf)

Recent growth in the production of light vehicles in the United States has been impressive. As shown in figure 1.3, vehicle production
increased by 40 percent between the recession years of 1991 and 2002. The 12.3 million vehicles produced in 2002 are clearly a post-
war record high for the U.S. industry in the midst of a U.S. recession. The resilience of the U.S. motor vehicle manufacturing industry
in a period of relative stagnation in the first part of the decade can be attributed to three major factors. The first factor is a clear pattern
of growth in the overall size of the automotive market in the 1990s – driven by growth in both personal income and the formation of
U.S. households. The second factor is the remarkable commitment to price incentives by major vehicle makers in the wake of 9-11 for
the purpose of sustaining vehicle demand and the U.S. economy in general. Finally, the continuing pattern of vehicle innovation and
model differentiation provided by the industry for the benefit of consumers— especially in recent years, the continuing development
of trucks and truck-like products that now comprise almost 59 percent of U.S. light vehicle production. As shown in figure 1.4, light
truck production in the United States more than doubled between 1990 and 2002.