I have read with a great deal of interest the many arguments that some of AGRR’s message forum contributors that have put forth in opposing the thought of Washington providing both loans and other types of financial aid to the American car manufacturers known as the “Big Three,” whose CEOs appeared before Congress last week begging for help. The “let ‘em hang” attitude was eerily similar to what many of us may very feel toward the OJ Simpson sentencing that took place at the same time on the opposite side of the country. One could argue the existence of karma being proven in either situation.
Simply stated, the United States cannot afford to lose its native auto industry. There is too much at stake to take a chance to allow current market forces to shutter GM, Ford and Chrysler and allow a larger segment of American industry to fall like dominos due to those closures.
You will get no argument from me that the Big Three have made colossal past mistakes, have had a long-term collegial arrogance toward consumers and possess a massive amount of smug self-importance. With that said, the reader should acknowledge that the spike in gas prices paired with the evaporation of credit due to the crisis with the financial community is causing the automakers to suffer staggering losses that they have little or no control over.
GM, Ford and Chrysler directly employ just fewer than 400,000 employees. However, you must consider the much larger number of jobs that can be affected if the Big Three are allowed to fold. First of all, you have businesses that directly supply production of their automobiles. That means steel, paint, rubber, computer chips, plastic and of course glass. Corporate names like Firestone, Goodyear, DuPont, PPG Paint would all suffer significant declines in their customer bases, causing layoffs and plant closures. Zeledyne, which manufactures the Carlite brand, Guardian and PGW are three OE glass manufacturers that heavily depend upon domestic car production and would certainly be impacted and suffer severe economic injury if Detroit picks up their tent and leaves the field.
Let’s consider the impact on Main Street if American car manufacturers run out of money. The repercussions of failure or even bankruptcy will resound even deeper into the American economy. There are trucking companies and railroads that transport cars from plants to the point of sale. There are dealerships that sell and service the cars. There are the vendors that support the dealerships like body shops, office supply and, yes, glass shops, not to mention local insurance agents, bankers and other white-collar businesses. All have been impacted by the general declines in sales that have taken place in the last half of the year. The downturn could easily accelerate into a landslide.
A point that we Americans continue to forget is that globalization is milking jobs, many of them based in manufacturing away from this country. As our domestic auto industry fades, more of our dollars fly overseas and all too often never to return. Check with Saudi Arabia with regard to oil revenues and China with almost everything else about reinvestment here back in the States. T-bills don’t count.
There is a socio-economic element that is undergoing change as well. Too many of our high school students are failing to continue into college and, in fact, statistically fewer are graduating even from high school, making any sort of economic security almost impossible as they fight for low-paying service jobs or just join the welfare rolls. By removing perhaps the greatest symbol of American manufacturing and its supporting vendors, the hemorrhaging of our economic lifeblood continues unabated. We are simply hastening our demise as any sort of world power without maintaining production facilities that can employ and provide a sustainable income to a growing number of undereducated citizens.
I realize that many readers have very good reasons for not wanting to support any sort of bailout for any industry, much less the domestic auto sector. Detroit for decades has pretty much has exerted so much of its political power to thwart pollution controls, safety regulations and fuel economy standards. It has ignored small car engineering in favor of the more profitable SUV and truck market. Some of that is due to the legacy UAW contracts that burden all three companies with heavy labor costs making simply building smaller cheaper cars less profitable.
It appears that the cash infusion along with the bridge loans that the Big Three CEOs were asking for will in no way guarantee success. Many things have to happen and break positively for them or abject failure or absorption will take place as a matter of course. Most pundits feel Chrysler, the smallest of the Three, which is owned by a private equity firm, Cerberus, is the most likely to be merged. Cynics have already noted that Cerberus is unwilling to risk any more of its resources to prop up their acquisition.
So why do it?
As a self-employed owner, I am more than aware of the Darwinian laws that apply in the business world and this torrent of “capitalistic charity” that is emanating from Washington is quite dismaying. It is the ultimate truism that there are but a select few corporations that have the political power to ask for and receive “corporate welfare,” even deserve it, I daresay. In this case, I find it grudgingly acceptable given the suggested outcome. I am truly tired of hearing two specific clichés.
The first: “no one would do it for my business.” You’re right. No one would. Impact a few million Americans and the GNP and you might get someone’s attention.
The second one involves somehow invoking the demise of the Free Enterprise system by bailing these guys out. When did the auto glass industry become the poster children of a free market? It’s laughable to suggest we are with all of our pricing problems.
As the Boys from Detroit mosey up to the soup line, I really hope that Congress along with the outgoing and future administrations can exact a formalized business plan that is both creative and workable and can lead our domestic auto manufacturing industry back into solvency. One obvious problem is the calcification of innovative thought within these corporations. Their feet should be held to the fire to quickly embrace fuel-saving technologies such as the hybrid and push the envelope further for building fuel cell and hydrogen-powered vehicles. That alone could be a wellspring for America to regain some leadership and respect in auto manufacturing. Since Japan and China are already sinking multi-millions into developing newer, smaller, less heat-producing batteries, America needs to leap-frog the competition. One side benefit is creating more jobs that certainly could balance out labor losses since the Big Three need to cut production to meet the shrinking market demands.
The harder part is to convince the American public that it can compete with imports in both design and quality areas, where in fact they are already proving that they can. The trouble is, will a few generations of Americans believe them after justifiably losing faith with truly buying American?
Letting the Big Three die under these current conditions may be a classic case of throwing the baby out with the bath water. You may not want to see the United States in a Chevrolet, but I’d like to see if my grandchildren could.
