There is a good chance that Big Three automakers will not survive into the New Year unless they secure access to a huge bailout comprised of taxpayers’ money. The auto industry is a mess, and given the impact a collapse would have, so are we. President-elect Barack Obama favours a bailout, on the condition that companies revamp their operations to produce energy efficient vehicles. In a pathetic attempt at lame duck power wielding, President George W. Bush told Congress that any money for the Big Three is contingent upon approving the free trade deal with Columbia. Even the Harper Conservatives have floated the idea of a joint bailout with the U.S. government.
Do the Big Three automakers deserve a bailout? By and large, Detroit doesn’t deserve more than a swift kick in the ass. But the U.S. government should—and will—give them the bailout money they require. And everyone but Mitt Romney can see why.
For several decades, the auto industry’s management has been extremely myopic. Transfixed by a seemingly endless supply of cheap oil and the profit to be made in a booming economy, Ford, General Motors, and Chrysler focused their energies on producing large cars, trucks, and SUVs for the American market. Their size was inversely proportional to their quality, and planned obsolescence reached a whole new level. Consumer appetites were voracious, and dealerships selling the same products sprouted on every spare intersection in every city, town, and hamlet.
As these three American giants rode the wave of easy profits, Japanese, Korean and German counterparts introduced smaller, more efficient vehicles to the American and Canadian market. Even American-owned subsidiaries in Europe introduced smaller cars. It wasn’t until the recent spike in gas prices that Americans and Canadians purchased vehicles from Honda, Toyota, and Kia. These American icons are imploding, but perhaps the fault lies with the buyer.
Adversarial unions in the U.S. and Canada have lagged behind. Instead of opting for an industrial-representative model and guaranteeing themselves seats on boards of directors, they demanded ever more from management, becoming a serious drain on the companies’ resources. For instance, unions and management are both politically powerful constituencies, yet neither agitated for national health care in the U.S. Most of the money from sales went directly towards health care costs for employees and retirees.
Now we are faced with a dilemma. Only the deluded think that the auto giants deserve money from the government, and yet we cannot allow these companies to implode. Far too many livelihoods depend on the auto industry, either directly or indirectly. The loss of any one of the Big Three would be devastating to those who do not deserve to suffer.
The people who depend on these companies are not union bosses, economists, or executives. Rather, they are machinists, accountants, factory foremen, sales reps, and retirees. Employees who, for better or worse, did what their culture told them to do: work hard, spend much, and save when you can. To forsake these Americans would be downright criminal, and create a culture of callousness from which we might never recover.
The ripple effect of a collapse would be felt by all over: parts suppliers all over North America, restaurant owners and their staff, high paid consultants, and retailers. The list is practically endless.
You often have to prune back to grow, but over-pruning can kill the plant just as it can revitalize it. If the government takes no action now, there might not be any manufacturing sector to speak of. Ultimately the face of North American manufacturing must change fundamentally.
If the U.S. is willing to spend $700 billion to bail out greedy bankers, there is no justification for allowing the Big Three, upon which millions depend for their livelihoods, to languish in the cold.
