Terror Attacks Stall Industry; Long-term Impact Unknown

September's devastating terrorist attacks on the U.S. continue to hold the country's auto industry hostage.

In terms of human loss, the tragic event claimed the life of Linda Gronlund, 46, environmental compliance manager for BMW of North America and former assistant general council for Volvo Cars in North America. She was a passenger on United Airlines flight 93, which crashed in Pennsylvania, one of four airliners hijacked. She was among thousands to die that day.

Auto production was halted at more than 60 plants in the U.S. and Canada on Sept. 11, the day of the attack. White-collar workers also were sent home as automakers emptied their headquarters under heightened security.

Gas prices more than doubled overnight in some regions as consumer panic caused long lines at gas stations. Border crossings between Windsor and Detroit continued for days after to take as many as 36 hours for commercial trucks, many loaded with shipments of auto parts, due to mandatory inspections.

An ocean away, the Frankfurt Motor Show came to an abrupt halt as visitors attending press preview days crowded around televisions to watch in horror footage of the World Trade Center collapse and the chaos in Washington, DC. (see story, p.65). The show opened to the public Sept. 13 with the German flag at half-mast, as U.S.-based executives struggled to find ways to return to the U.S. with international flights interrupted.

Many industry observers expect at least a short-term impact on auto sales. “The situation reminds me of the Gulf War,” says David Healy, analyst with Burnham Securities, “where people sit around and watch television and don't go out and buy cars. They just sit there in shock. I think it wears off and over time things get back to normal. I think car sales and, for that matter, all retail sales will be affected for a while. Probably measured in weeks and days and not months and years.”

Analyst Jim Sanfilippo, executive vice president and regional manager of AMCI Detroit, agrees, raising the possibility of a “spate of patriotism” that could give a boost to the domestic automakers.

But economists say even a temporary slowdown could have a detrimental effect on a U.S. economy teetering on the brink of recession. Big-ticket items such as new cars are especially vulnerable when the country's confidence is shaken.

Nextrend analyst Chris Cedergren says his 2001 sales forecast was among the highest, based on the theory younger consumers always have money at the ready and don't make ties between news events and how they live their lives. Last week's reign of terror, he says, has the potential to change that.

Some analysts now are calling for U.S. auto sales to dip as low as 15.5 million this year. The dollar also plunged to a six-month low against the euro and yen following the attack, and shares in European and Japanese carmakers fell all that week amid fears of falling consumer confidence in the U.S. and production disruptions. GM and Ford shares were suspended for the four days following the attacks. Ward's estimates production lost among automakers with North American facilities at 52,636 units in the first week alone.

The day of the terrorist acts, many plants closed out of compassion, and some experienced additional downtime due to parts shortages at U.S. border crossings.

General Motors Corp. initially lost about 100 total hours of production at eight plants — six in the U.S. including Linden, NJ, Baltimore and Wilmington, DE — and two in Canada.

Ford Motor Co. closed all Canadian and U.S. manufacturing facilities during the second shift Sept. 11, as did DaimlerChrysler Corp., Toyota Motor Mfg. USA Inc. and Mitsubishi Motor Mfg. of America Inc. BMW says it lost 750 units when it ceased production at its Spartanburg, SC, plant.

Plants affected by parts shortages included: DCC's Windsor, Ont., facility; GM's Ontario Truck, Janesville, WI, Flint, MI, Oshawa No.2, Ont.; and Pontiac (MI) East plants; Ford's Ontario Truck in Oakville, Ont., Wayne, MI, stamping and assembly operations and assembly plants in Dearborn, MI and Wixom, MI; AutoAlliance Inc.'s Flat Rock, MI, plant; Honda of America Mfg. Inc.'s Allison, Ont., factory; and Toyota's Georgetown, KY, facility.

“We're hopeful that adding the National Guard and adding truck lanes going over to Canada is going to help speed up the process,” a Chrysler Group spokesman says of the continent's busiest crossing between Detroit and Windsor, Ont.

Ford says it lost more than 16,000 units by the end of the first week and was reviewing its near-term production plan because of component shortages.

The U.S.-Mexico border also was on alert status.

On Friday, Sept. 14, shifts at all GM and Ford facilities in the U.S. were cut short so employees could take part in the National Day of Prayer and Remembrance decreed by President Bush.