The American auto industry is in literally dying in front of our eyes. Now, there is a potential for a government life-line, or bailout, as the process is now fashionably called. This may be the last chance of survival for at least Chrysler and GM. Ford is currently leaner and meaner, and may be able to outlast the others for awhile.
For whatever shot at life the government loan can give them, it will come at very high expense. The conditions applied to such a loan could kill them just as surely, but over a longer span.
As the Feds drop in these dollars, they will demand that their specific agendas be met, and I guess there could be a legitimate argument to that right. Mileage goals, emissions restrictions and labor considerations will be some of the most significant, regardless of what the market dictates. But is there anyone out there who truly believes that the government can run these car companies any better than their own management teams have been able to do? Nancy Pelosi and Barack Hussein Obama might think so, and that should give zero-comfort to any of us.
The problem is that the domestic Big-3 are failing under so many pressures which no ownership or management can control. First, they are in a global recession like everyone else, where even mighty Toyota is publishing sales losses in the 25%-30% range. Next, apply the problems of big labor that are costing them premiums today, and the legacy costs of the best retirement and healthcare any human workers have ever enjoyed. Next, throw in the global pressures of so many manufacturers coming on-stream from low-cost countries like China, Korea, India and eastern Europe. Finally, the costs of gasoline (although temporarily relieved) are forcing people away from profitable Big-3 products that just a year ago they couldn’t build enough of. One could refer to all of this as a “Perfect Storm”.
It is extremely difficult for me to discuss what should or shouldn’t be done. The problems that these companies are dealing with impacted my family and me directly and profoundly earlier this year. I have modified my dependency on the industry somewhat, but certainly not in total. I am still vulnerable to the state of the automotive industry in this country like millions of others. It would be easy to say to Washington, “give us the money”, but that adds so many problems of it’s own, for what is probably just a band-aid that would soon wash away.
It’s probably best to continue to let the market decide what ultimately happens to these companies. I think that will mean bankruptcies and a whole lot of pain for many, maybe including myself. But in the long run, that is probably for the best. $25 billion now, will only last a few months, and the perfect storm is set to last much longer than that I’m afraid. In the meantime, taxpayers will have thrown away just that much more in this year of bailouts.
The American auto industry has been headed in this direction for at least 30 years. The globalization of the engineering and manufacturing of autos has eliminated a near-monopoly where the Big-3 could sell (and pay) at almost any level they wanted to, and so now they reach the end of the line. No one knows if even a much smaller and less affluent industry can even survive here anymore. It’s really doubtful. Electronics couldn’t. Appliances couldn’t. No large, labor-intensive products can be built here at $30 or even $15 per hour when they can be built in other places for $2.00 per labor hour. Companies like Toyota and Honda who make cars here now, at $25 per hour, will outlast the Big-3 only because they don’t have the legacy costs, but even they will eventually have to move on unless someone wants to work the factory line for minimum wage and very limited benefits.
Eventually, the new world order and global economy will start to equalize everything, so that every autoworker in the world, whether in Germany, Mexico, or India, will make the same wage, maybe $10 per hour. Only then will it become possible for Americans to get back into the game. This is what we really need to consider before we hand out these billions. And when we do, the band-aid doesn’t really make much sense.
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