STATEMENT
of the
Honorable Nydia M. Velázquez, Chair
House Committee on Small Business
Full Committee Hearing: “The Role of Small Business Suppliers
and Manufacturers in the Domestic Auto Industry”
May 13, 2009, 10 a.m.

For decades, the auto industry was a symbol of American innovation. But in the past few years, a combination of poor management, costly obligations and dwindling profits has taken its toll. The resulting declines have done more than weaken the Big 3 - they have crippled the small business community. As the automakers fight to stay afloat, countless entrepreneurs have been caught in their wake.  

All across the country, small suppliers are struggling. They are fighting to survive in an uncertain industry, and are suffering more than their corporate counterparts. This is a serious concern. These businesses not only employ millions of workers, but sustain the very industry we are trying to save. At the end of the day, strengthening and supporting small firms will be critical. Failure to do so will shrink the supplier base further, dealing a lethal blow to businesses like GM and Chrysler. 

In today’s hearing, we will discuss the current state of the auto industry, and examine the impact of its decline on small businesses.

Like most corporate giants, the automakers rely on entrepreneurs. The industry is sustained by a multi-tiered, nationwide network of parts providers. These businesses produce everything from carburetors to tire rubber, and the vast majority of them are small ventures. But don’t let their size deceive you - they account for literally millions of jobs.

Parts suppliers alone employ 3.2 million workers. But as the Big 3 continue to slide, an alarming number of small firms are following suit. In fact, experts predict half of the nation’s auto suppliers will be shut down by 2012. Many have closed their doors already. 

The impact of these bankruptcies is not isolated. When a small supplier goes under, it sparks a ripple effect - one that resonates throughout the entire economy. On the most basic level, we are talking about large scale job losses. Already, thousands of workers in related industries have been laid off. If this trend continues, thousands more may lose their jobs.  

In the last few months, steps have been taken to shore up the big automakers. But despite these actions, little has been done to help small suppliers. If anything, efforts thus far have failed small businesses. That’s a big mistake. Cutting entrepreneurs out of the process means more setbacks down the road, especially considering the end-goal of these measures - job retention.    

Ultimately, we are trying to save jobs and stabilize our economy - not prop up an industry that has failed to keep pace with the times. Small suppliers are the businesses actively looking to adapt. It only makes sense to give them the tools to do so.

One of the greatest lessons of the financial crisis is that stability comes from the bottom up, not the top down. The automakers are no exception. It is critical that any restructuring accounts for small suppliers. Proposals to aid second tier manufacturers, for example, would go a long way. But regardless of how the auto overhaul takes place, one thing is certain - it needs to be deep enough and comprehensive enough to reach small businesses. After all, that’s the industry’s foundation. That’s where the jobs are, and that’s our best bet for stabilizing and rebuilding.