INDIANAPOLIS-While Congress debates whether to provide a "bailout" to the troubled domestic auto manufacturers, credit unions that were originally formed to serve the industry say they have been preparing for just such a bumpy road for a long time.
Moreover, credit unions that serve the Big 3 said they are well positioned to assist their membership-whatever the fate of the bailout.
Signature loans, loan deferrals, and programs to assist with career transition have already been instituted by credit unions that serve the automobile industry to help a segment of their membership whose employers have been downsizing for years. In fact, most credit unions that spoke with Credit Union Journal felt that a bailout decision for or against the automakers will not dramatically impact their shops' financial position or their ability to help members.
"I'm pretty sure 90% of automotive credit unions are prepared. We have all been going through a transition for a while," said Ann Garmon, president and CEO of the $70-million Horizon One FCU here. HOFCU helps members who lose their auto manufacturing jobs transition to new careers through guidance, education loans and its skip-a-payment program.
Garmon, who is also president of the Council of General Motors Credit Unions, said automobile industry CUs are well capitalized and have been adding SEGs and moving to community charters due to the carmakers' downsizing. The economy, however, has quickened the pace. "It certainly has smacked us in the face," she said. "We have had to speed up our focus on gaining new members."
Horizon's main location is across the street from a GM plant that has downsized from 6,800 employees to 800. The CU has already built a "successful" branch located away from the car plant and is changing the credit union's image. "We changed our name from Drover Street FCU in July last year, have gone to a community charter, and are now focusing on building our brand," Garmon said.
Recession Not New To Michigan
In Dearborn, Mich., the $2-billion DFCU Financial FCU was formed in 1950 to support Ford employees, but has expanded to a community charter.
"The automobile manufacturing sector has been restructuring for quite some time," reminded DFCU President and CEO Mark Shobe. "Here in Michigan we have been in an economic downturn, call it a recession if you want, for a much longer period of time than the U.S. economy. We are already seeing precipitous changes in household incomes and aggregate employment levels. So we have been preparing for this for years. That's why we are so well capitalized and why we are performing at the level we are just to be able to go through this period of Darwinism and survival of the fittest."
DFCU recently announced it plans to pay members a $17-million dividend for the third year in a row. DFCU, Michigan's largest credit union, has had a banner year so far in 2008, with $28 million in net income for the first three quarters, up from $22.2 million for the same period last year.
Like many other CEOs whose credit unions serve carmakers, Shobe said a bailout won't prevent auto manufacturing plants already slated to close from shutting down, and that downsizing will continue. "But it will be a more orderly restructuring," he said.
That's the sentiment of Mike Pastirik, CEO of the $36-million United Community FCU, who believes the Big 3's downsizing, large or small, will not significantly impact his West Mifflin-based credit union. "It's not going to affect us," he said. "GM has been talking about closing our plant for four years. Now it's shutting down in December."
In Mansfield, Ohio, it's not just the carmakers' downsizing that the $40-million Auto Workers CU has had to contend with-it's also adjusted to the local GM plant transferring in employees from other cities.
"I'd say 70% of the auto workers here are not from Mansfield," said CEO Bob Grove. "They don't bring much to the local economy. They are either commuting or renting during the week and going home on weekends."
Auto Body CU in Lansing, Mich. is another that has had to diversify its membership base, which Marketing VP Jeff Croff says not only benefits the $145-million CU, but its members who work at the local state-of-the-art GM plant. Of the CU's 26,000 members, 25% are GM employees and retirees.
"Because we're diversified we will be able to serve our auto workers that are in transition, no matter how difficult times get for that industry," Croff said. "We have career transition loans that are two years interest free. We also do our Lending in Hand signature loans for up to $2,000 with a three-month deferment."
Having your city claim the newest GM plant North America, pointed out Croff, is an advantage and could lead to additional auto workers transferring to Lansing as GM reorganizes.
An automakers' bailout could mean more business for the Buffalo, N.Y.-based Woodlawn Auto Workers FCU, suggested CEO Shirley Meyer, who predicted the $82-million credit union could see an increase in auto loans if automakers receive government loans. "Members have been sitting back, not knowing what's going to happen, thinking about whether they can afford the payment for a new or used car," Meyer said.
With the real threat of automakers going bankrupt, much of Meyer's concern lately has been with members who are retired from the car companies. "The younger workers will eventually find jobs," suggested Meyer. "But what are retirees going to do if their health benefits and pensions get cut? They are on fixed incomes and have adjusted their lifestyles to their current situations."
Most Favor Bailout Funds
The majority of automaker CU leaders who spoke with Credit Union Journal are in favor of the bailout, citing the impact on a large segment of the economy if the auto companies fail. The auto industry employs workers in every state-including Alaska and Hawaii. More than 2 million jobs-from manufacturing, to parts, to auto dealers-depend on carmakers for their pay, according to a report from CNNMoney.com. "You know the old saying, 'As GM goes, so goes the country,'" offered Garmon, paraphrasing the quote from former GM VP Charles E. Wilson.
But Lyle Wermund, loan quality assurance and property control manager for the $300-million Blackhawk Community CU in Janesville, Wis., had a different take. His credit union serves members at the local GM plant that's closing this month. "I have handled people's money for 35 years, and if they continue to borrow and borrow they'll face bankruptcy. That is where the automobile industry is right now. You understand what might happen if the auto manufacturers don't get a bailout. But is it reasonable that they do? Are you just throwing good money after bad?"
