Don’t junk the U.S. auto industry

November 19, 2008

eugene-ludwigMr. Ludwig, a former U.S. Comptroller of the Currency, is founder and CEO of  consulting firm Promontory Financial Group. Any opinions are his own; GMAC Financial Services is one of Promontory’s clients.

The economic upheaval wreaking havoc on the global financial system is threatening to claim another victim: the domestic automobile industry and its financing arms.

General Motors Corp. could run out of cash by January without help. Ford Motor Co. and Chrysler LLC also need fast government intervention to stay solvent. Automakers and the UAW are making their case to Congress this week for emergency help. But even the supporters of a $25 billion aid package for the auto industry are dubious about whether they have the votes to pass it.

This raises the question, why not just let them go bankrupt?  The domestic auto industry is everyone’s favorite whipping boy, and its problems have been growing for decades. Some are of its own making; many are circumstantial. But we cannot blithely accept its failure as somehow inevitable or deserved.

Our economy has been badly battered in recent months, and has become increasingly fragile. The erosion of our industrial base already presents real security risks to our nation. Why would we accelerate this sorry state of affairs at a time of national crisis by sitting on our hands and letting a signature American industry collapse?

The American auto industry is well worth saving, for many reasons.  One reason is that for the past decade Detroit has made heavy investment and steady progress in improving its competitiveness, what it calls “altering the DNA” of American cars.  US automakers spend $22 billion annually on plants, equipment, research and development. Breakthroughs are at hand in developing alternative fuel propulsion systems, and our national well-being and security depend upon seeing them through to completion.

If we allow U.S. automakers to go under out of anger, resignation, or ideology, it will only mean all the work and investment of the last decade will be ceded to our foreign competitors instead of being plowed back into the U.S. economy.

Another reason is the industry’s importance to the job market and the wider economy.  Automobile manufacturing directly employs a quarter of a million workers and indirectly about one in ten U.S. jobs are related to some degree to the automotive sector, according to GM estimates.  So the effects of a collapsed U.S. auto sector would not be limited to Detroit – they would be magnified as the ripples spread to related industries.

If we allow U.S. automakers to fail, millions of retirees depending on auto company pensions will be at risk and auto manufacturing jobs will disappear. The ripple effect won’t end there; millions of jobs in related sectors, such as  U.S. manufacturers of steel, aluminum, iron, copper, plastics, rubber, electronics, and computer chips, will also feel the pain.

Worse yet, the promise of a meaningful future for American manufacturing would fade. As that promise dims, the role played by manufacturing jobs as a passport to the middle class would likewise disappear.

The auto manufacturers did not cause this crisis; they were working hard to reinvent the quintessential American invention when high oil prices and economic upheaval hit, dragging them into the vortex. There is a tendency to think that an example must be made, that someone must be allowed to fail.  But do we really need to cut out of the heart of the real economy? When the patient is in the middle of a full blown coronary, it’s no time to discuss lifestyle changes.

We can and should revisit subjects like executive pay scales and expense controls when the industry isn’t at death’s door.  For now, we should recognize the gravity of the moment, and use the TARP funds and pass necessary auto-related financial stabilization legislation to avoid digging a bigger hole for the national economy.

83 comments

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Seems to me that the US auto industry has been actively resisting building cars people want to buy since the 1970s (coincidentally, when I entered the auto market). And at this point, all their experience and expertise is about conducting downsizing operations, since that’s all they’ve done this generation.

What’s to save?

With united auto workers at $76.00per hr. i think it time for them to take pay cut and aline more with rest work force.

People seem to think that bankruptcy is the end. It’s not. The airlines have proven this several times.

Chapter 11 will allow the auto makers to restructure their costs. Hopefully that restructuring would go from the factroy floor to the board room. In fact the feds should use the $25B loan as leverage to make a few changes.

There is no point putting Americans further in debt to finance the foolishness of high paid execs. It’s time to pay the piper.

Posted by Eric | Report as abusive

I agree with your article. I also strongly agree to your point of executive pat scale adjustments but also include their BONUSES, which by the way are out of line. The contracts these execs write and the Boards of Dir, approve, should be approved by Stockholders, not BoD’s, and this goes for ALL other companies that have created this situation.
Now, Let’s also put blame on the UAW and other unions that have raped the companies, stcokholders, and perspective consumer’s of the auto industry. I would have no problem going along with a LOAN, but ONLY if the UAW steps up to the plate and admit they have caused the auto industry great pain. They’ve not given up anything, and feel they are entitled to every penny their contract gives them. I disagree as I’ve seen work ethics of union personnel cause waste and greed. These folks need to pay for more medical costs, pay more towards their healthcare insurance premiums and scripts, a reduction in pay is warranted, and a reward payment at year end for showing up at work with out taking time off is totally absurd. No one ever paid me extra for showning up for work and putting extended hours when necessary. It appears the only way they will understand the problem is if the companies fail, and they are left without a job at all.
Unions are very helpful and can protect, but more times than not, they proctect in the wrong direction. You do your job, or lose it. Unions have made many people lazy.
By the way, I’m a retired Salary Autoworker, and witnessed many UAW members in action, so I am not fantasizing about anything I’ve noted here. I do not want to lose my pension, by almost every benefit I’ve ever earned and enjoyed, have been removed over the past dozen or so years.

Posted by Jim S | Report as abusive

Thank you for your comprehensive remarks, people need to understand all the relationships that our automotive and manufacturing. Perhaps had we solved the healthcare issue long ago, this situation would have been different.

I will try to feature some of your points on our blog.

P-L-E-A-S-E !

When you loan someone money its usually secured by something. In this case what? The future sales and profits of the big three! ha ! If they are “too big to fail” what’s to stop them from doing this again and “extorting ” more money. Showing up to beg for money from you and me in private jets (google abc news 11/19/20080) and telling of the cost cuts. If the government bails them out, then my 1040 will become the biggest lie in history next year.
Are you listening Congress ?

Posted by No Way Jose | Report as abusive

“People seem to think that bankruptcy is the end. It’s not. The airlines have proven this several times. Chapter 11 will allow the auto makers to restructure their costs. Hopefully that restructuring would go from the factroy floor to the board room. In fact the feds should use the $25B loan as leverage to make a few changes. There is no point putting Americans further in debt to finance the foolishness of high paid execs. It’s time to pay the piper.
-Posted by Eric”

Excuse me, Mr. Eric… the automakers ARE NOT like the airlines AT ALL. Airlines provide a service. Automakers, on the other hand, PRODUCE REAL GOODS (not services) and have a supply chain in which parts move from smaller suppliers to larger suppliers and finally to the automakers themselves. Supply chains depend on a steady flow of raw materials, manufactured parts, lead time for planning and a relatively stable customer base.

If an airline goes bankrupt, it restructures, catches its breath and starts again. Airline passengers can take a bus, train or car to get to their destination in the meantime.

If an automaker goes bankrupt, the supply chain falls like dominoes and the supplier companies go bankrupt left and right. By the time the bankruptcy process is over, there are NO MORE SUPPLIERS left in the supply chain because automotive suppliers live on slim margins and have done so for years now, and can’t survive shutting down.

By the way, who would want to buy a car from GM, Ford or Chrysler once they declare bankruptcy? Who would trust investing $20 or $30 thousand dollars in a Big Three car after bankruptcy? Who would take the chance that the Big Three would go on and survive, even IF they somehow found new suppliers following a bankruptcy?

Posted by Tim | Report as abusive

I prefer to give directly money to all the workers including suppliers than giving money to the three companies. Even If you pay 25 billion to these three wont
guarantee job is still exicited. They continue to cut
the workers transplant to other countries. My and other
people tax money is not for tansplant or pay for Excecutives. They have to cut the salaries and other perks for those executives and fire those in the board of directiors and appoint new people.

Posted by santhosh Mathews | Report as abusive

$76 dollars an hour!!! To strap a bumper on a car?

Think about this, my fellow Americans: Experienced Nurses
make about $25 dollars a hour, and they are the on the front
lines when it comes to saving your life.

Now, do you think that the high school drop out who puts
4 bolts on a bumper of a car that will fall apart before you
finish paying for it should earn 3 times what a nurse does?
Should they make 4 times more than Police Officers? How
about 4 times more than what Teachers make? Firefighters?

I think we can now all agree that the UAW and the Big 3 are
their own worst enemies.

Posted by Keith | Report as abusive

This is an industry that has staunchly resisted both consumer wishes / needs and government attempts to make them change their ways. To say that American auto manufacturers did not cause this crisis is like saying that investment banks had nothing to do with the current financial crisis.

Consumers want well styled cars that are more fuel efficient and reliable. Detroit gave us gas guzzling monsters; Strike One.

Consumers need car companies that invest in zero-emissions technology – electric cars – to reduce the industry’s reliance on carbon fuel. Detroit has killed off several promising electric car technologies, that may have provided sustainable jobs for thousands of North American workers in the future. Strike Two.

Detroit has long allowed the CAW union to manipulate the costs of assembly and parts manufacturing to the point where American cars are unprofitable. There is a good reason why Toyota and Honda factories are non-union: they partner with their employees for mutual benefit. You’re Out!

Posted by Wendell Y., Toronto, ON | Report as abusive

Please, with the airline industry example. Two went into bankruptcy court, emerged, and were promptly allowed to merge (Northwest and Delta.) There has been no demonstrated increase in their profitability or efficiency. Also, if you have flown an airline lately, you must have noticed that you are paying through the nose for everything from pillows to a can of soda. Or, you are being left behind when your flight is cancelled for no reason, or left on the tarmac for hours. This is your idea of an example that the auto industry should follow? Give me a break.

Posted by Curtis | Report as abusive

Eric is totally right, and what is the point of giving them 25 billion tax dollars when they will probably just go bankrupt later anyway? Workers and retirees will still lose their jobs and pensions, just not until after the executives run off with our money

The infuriating thing about this to me is that American car companies have the resources and technology to make good cars that people want to buy, they just don’t feel like it. They do not want to make the necessary changes to become competitive and profitable, and giving them a bailout won’t give them any incentive to do so.

Posted by Tina | Report as abusive

I wonder when people will start talking about “synergy”. To me, it is the only way out – not only for the carmakers but also to all other industries.

I suggest to unite all three big boys and furnish a common plan. This will help expenses to be reduced tremendously and create a great deal of synergy not only in cutting expenses but also in engineering as well as restructuring the whole organization and plants.

Posted by Yaman Yalcin | Report as abusive

I am a consumer who believes it is important to have an American car industry in this country. Critics call helping the American Auto Industry a bailout. I strongly believe this is an investment to rebuild our nation’s economic engine. If we do nothing, the future is clear. We will see even more economic upheaval, communities will lose businesses and revenue, and thousands of jobs will disappear. Give the car companies a chance to make a turnaround. If it wasn’t for the credit crunch, these companies would be on the road to succeed. If Congress does not act, it will be the shortest and fastest road from recession to depression. Our economy is suffering enough. Please help prevent further job losses and devastation to our communities. Allow the car companies to make the electric vehicles so we can stop depending on foreign oil. We cannot afford to lose this cornerstone of our economy. We should not depend on other nations for our manufacturing capabilities or new technologies. And we do not want to contribute to an even deeper collapse that will leave too many people facing further economic uncertainty.

Posted by Mary Maiorana | Report as abusive

Saving the auto industry is not about saving the american auto manufacturing coorporations, it’s about saving the livelyhood of the millions of American’s who are dependent on this industry. Why was it appropriate to save wall street after they made 30-40x their assets in bad investments but when the auto industry is in trouble, the “slick-dressed,” “all of one, and none for all,” “free-market will fix all” mentallity wins out? The auto industry has known for a decade that they are in trouble which is why they were taking such major strides to buy out contracts and downsize. They took a proactive approach to solving their problem but were blindsided by the banking industries unimaginable stupidity. So again, why should we allow an industry who is trying to improve fail, while bailing out another?

Posted by Dis-enchanted | Report as abusive

Define “breakthrough in alernative fuel”
are you talking about Gm’s hydrogen fuel cell cars, estimated to be in production around 2012? BECAUSE Honda has one entering Pilot Markets in 2009. Are you talking about Hybrid technology? Because Honda realized that in the 90′s. Are you talking about E85? Because Detroit tried that in the 70′s and it watched it fail?

Posted by John | Report as abusive

A restructuring of the industry seems the only route to take, given our world-wide inter-dependence upon each other’s economies. Our imports and our exports are vital in restoring strength to our economy. The Big 3, like e’m or hate ‘em, are major players in our export markets. A sensible approach would seem to be the extension of loans to the companies that came with conditions that limited Top-Executive pay, benefits, and bonuses, that reduced the influence of the unions, and that brought auto worker wages in line with jobs held in other sectors by persons of similar education and experience levels. The Big 3 seem very quickly to becoming the Big 2, and these in turn may become the Big 1. With frozen or trickling credit to consumers, a large boom in car sales in the immediate future does not seem likely, and so profits within these companies seem slim. If we are to save them, then they need to either merge, streamline, or restructure, or some combination of the three. In a free-market setting, this is what is expected of companies that find themselves in trouble. Either sell out to the highest bidder and liquidate, get together with someone to strengthen your base, or rethink your game and start over. Chapter 11 has it’s benefits, but also would doom those sectors that rely on the auto-industry for their survival. Where does the bail-out stop? As one industry goes, they all go. Where the US economy goes, so too the economies of China, India, Japan, Norway, the Middle East, as well as Brazil and Venezuela, to name a few. We need to save as much as we can, and in the process, restructure for future strength. Reducing dependence on foreign oil will be only marginally impacted by the conversion of gasoline burning engines to alternatives. The larger picture dictates that not only our economy, but all economies find a replacement for ‘petrodollars’ and the instable credit that has been propped up by them. This is a hard road to walk for emerging economies such as Hungary, as one example. As the oil producing regions, like Norway, Saudi-Arabia, Russia, for examples, feel the credit and economic crisis, their dollars are being brought home, and further weakness are felt around the world. We can only bail out so many, for so long. Let’s get it right when we do it.

Posted by Ursula Stanton | Report as abusive

The only way you do this deal is to attach strings to
this corporate welfare request. Absolutely no bonuses
or dividends will be paid until the bailout money is
repaid in full by these so-called corporations. Next,
all of them have to meet much higher mpg benchmarks than
the pathetic number our great government has required of
them in the past. Not the estimated mpg but actual mpg!
Third, all employees, hourly or salaried; union or non-
union, will face a minimum 10 % cut in pay. Fourth, all
auto industry employees will pay 10% of their medical insurance premiums. Fifth, all retirees, also face a 10%
reduction in pension payments and medical coverage. Last
of all, no raises shall be given until these companies have repaid all of the “taxpapers” bailout money. You want to stay in business, here our the terms. You don’t
like this deal, see ya!!!

Posted by Mack Targoyne | Report as abusive

The basic purpose is transportation in optimum manner. If the competition is in the area of individual transportation and the buyers are individuals, concentrating on products for mass transportation where buyers are not individual should solve the problem.

The auto dealers did not have a difficult time telling lies about their vehicles and using tricks to sell cars. How can anyone become concerned with their well being considering.

There are lots of car manufacturers, choose a honda or other type.

Their lavish lifestyles are rediculous, in my opinion.

Posted by stan | Report as abusive

I didn’t realize how much the workers were being paid. They could probably be cut back to a still-lavish wage and raise $25 billion in a very short time.

What do you get when you cross organized crime with welfare? Did you know that GM workers can fund Ford workers on strike, but if GM supported Ford during a strike it would be a federal crime?

Do you know how to play chicken? You just have to prefer death to defeat. It worked with Reagan and the Soviets. I’m tired of life with the UAW.

Posted by Kurve Ball | Report as abusive

We keep hearing the proposed sacrifices by the auto-makers: executive pay. This is a diversionary joke advanced by the proponents of the $25b loan (on top of the $25b loan approved for “retooling” — don’t make me lough). Obviously the legislators take the tax payers for fools. Dealing with executive pay is irrelevant, if not inappropriate, and will not make a dent in the inefficiencies plaguing the BIG-3. Instead, here are some of their real problems.
1. UAW. It is the legacy costs — stupid — that is at the core of what is ailing the BIG-3! a. no layoffs regardless of workload through “10-30% job bank” (while the BIG-3′s salaried & non-union workers are axed in the thousands); b. Health coverage with minimal copay for ins. premium, doctor visit or medications (for perspective my registered-nurse wife’s copay are $735/mo ins., $50 doctor visit & $20 for generic medication); c. Defined benefits for UAW workers & spouse with health coverage & pension (while the rest of us sweat with 401k with no company contribution).
2. Too many brands and models, approx. 100 for GM (70 too many) versus 30 for Toyota which sells more cars).
3. BIG-3 lose money on cars selling under $20,000. These cars cost more to produce than their Japanese equivalents, but can entice customers only when sold at 20% less than their Japanese equivalents.
4. Too many dealerships (60% more than required) that BIG-3 are prevented from terminating due to legacy structure.
5. And the list goes on and on…
Conclusion: Chapter 11 Bankruptcy is the only mechanism that can save the BIG-3.

Its true that Chapter 11 is not the end, but the only ones that make out in those deals are the executives. The workers, who have put in years of dedicated service, will lose basically everything while the executives will be rewarded for their “good job” saving the company. People complain that UAW members can make what is equal $70 per hr (when you factor in benefits), but I don’t hear anyone complaining about government employees who average $104 per hr. Government intervention started this, they can fix it. The rest is just fashion and opinion.

Posted by Jerry | Report as abusive

I have worked as Ford management. I have worked as Honda management. The Big 3 deserve NOTHING. The pivotal question taxpayers should be asking is: “How can Canadian & American executive and workers at foreign manufacturer plants in North America make the best cars in the world but the Big 3 can’t?”. The reason is simple, no amount of money will change the ignorant, lazy attitudes and sense of entitlement pervasive at the Big 3 from the President to union worker to mail room clerk. They DESERVE to go bankrupt, and starting with the Boards of Directors should be sued by the shareholders for breach of fiduciary care to the companies.

Posted by turismo | Report as abusive

‘The auto manufacturers did not cause this crisis’ – I agree! However ‘they were working hard to reinvent…’ is a bunch of bologney. Invent what? Hummers, Escalades, Yukons…. Invent what? Gas Gulpers – what a new concept. Detroit is a facility that has reached its point of being obsolete and useless, good bye dirty city. And the UAW as well, what purpose do they serve any more other than to line the pockets of the Union itself?

Posted by J Obie | Report as abusive

I am not sure whether a bail-out should be allowed. But I am pretty sure that in these conditions we cannot let the big Two – Ford and GM go down. The comparision with airlines industry re-surgency is non-sense. When I go to buy a air-ticket I only will look into which airline gives me ticket at lowest cost. I am not going to check whetehr how they fared in the past. I buy a ticket of airline means I am using it for one flight not every day. But buying a car is different. I will definitely look into the credibility of the producer. Why should I buy a car from a previously bankrupt company as I need service of it atleast every year and I also have to look into re-sale value of it. I am from India, here Daewoo released a car called Matiz. But then they stopped production and all the consumers were in deep trouble. So the underlining fact is that I will not buy a car from a guy who has previously gone bankrupt, why should i(especially when so many other options are there)?

But giving the money with no strings attached would be another mistake. I see this as an oppurtunity for the Obama administration to force them to do what he promised (bringing eco-friendly car).

I say don’t bail them out. This is what they get for building lousy products for decades. They also don’t even build a lot of their models in the US, but the foreign automakers sure make a lot of their models here in the US. I also think the Big 3 have way too many models to chose from. They seem to hardly ever come out with something good, and build from it in future generations. Look at Honda, they’ve been building Accords and Civics for over twenty years continuing to make them relavent to current times. You can look at BMW too, same thing. They’ve been making the same models forever and updating them so they stay desireable. Granted, BMW and Honda do have new models, but they keep sticking to what works. GM should see that this method works. They’ve been getting great success with the Corvette for over 40 years, Ford has their Mustang. I say find a few models that people like, stick with them, and make them better. Instead, the come out with something like the Aztek.
I also find the construction of the foreign brands to be superior, especially when looking comperative models accross different brands. My rental car experiences recently also seem to prove this point. Bottom line is these companies have been doing wrong for too long, and they made this bed for themselves.

Posted by Morgan | Report as abusive

Funny, the government didn’t bail out U.S. train manufacturers when they began to go out of business.

America long ago allowed the “Big 3″ to actively take steps to replace one of the worlds finest rail transportation systems in the world with miles of asphalt and SUVs. If any loans are extended to auto manufacterers, then equal amounts should go to railways and locomotive manufacturers as well.

Who’s next – shall we start throwing money at airlines too? They are experienced at Chapter 11 operations, maybe it would just be easier to replace Detroit’s executives with the executives from Southwest Airlines.

Posted by Michael | Report as abusive

To aid the Big 3 or not.

Sometimes an alternative, while not a good thing, is the best of two evils.

The late Maurice Chevalier once said;

” While growing old is sometimes depressing, the alternative is much worse “.

” While aid to the Big 3 auto companies may not be too popular, the alternative is much worse “.

Some, many, have predicted that if the big three were to collapse, five million direct and at least another ten million supplier jobs, in the US and Canada, would disappear overnight. As well, another million and a half retirees would suddenly be left with no pension income and no health plans.

22 % of the total North American GNP would be instantly gone!

We could then be very close to an out and out depression!

I respectfully suggest there is a way to help these companies to immediately sell hundreds of thousands more new and used vehicles, AND NOT ONE PENNY OF OUR public monies would be injected directly into GM, Ford & Chrysler to pay pensions and health plans for retirees and multi million dollar severance packages for executives.

This is how I would suggest this be accomplished;

The US and Canadian governments grant anyone – individuals and company fleet vehicles alike – a $5,000 tax credit for each new and up to 3 year old used vehicle that they purchase.

This tax credit would be a direct deal between the governments and the buyers and the buyers could still cut other deals with the auto dealers like “ thousands off “ and “zero percentage financing”.

NO PUBLIC MONEY GOES DIRECTLY TO THE AUTO COMPANIES!

This initiative would result in the immediate sale of hundreds of thousands of vehicles – which, after all, is the main objective.

AND other positive spin-offs – hundreds of thousands of less “green” and some unsafe vehicles would be taken off the roads immediately thus adding to a cleaner environment and a little less dependency on foreign oil.

To those in the auto industry who may complain of Government subsidies and protectionism – while you have a point, drastic times call for drastic action.

Respectfully submitted.

Posted by T. W. (Ted) Gardner | Report as abusive

Well if and when Detroit wants to make serious changes, we’ll see all parties sitting at the bargaining tables again trying to work things out. It’ll take consessions from retirees, from current workers, from management, and from suppliers. Everyone that’s tied to the industry needs to pony up and sacrifice to make it survive. They need to change the way they conduct business. I don’t see any of that happening right now. They all have just run to Washington with their hands out to keep the status quo citing they need until 2010 before bargained changes will take effect. Well I say the heck with that. If it’s such and emergency, then they’d be trying to hammer things out right now. You can’t keep on going in the same direction and expect to get to somewhere else.

Posted by Roundup_Logan | Report as abusive

Why would you bail them out?
Let them amalgamate and start to use their heads first before pissing your tax dollars against the wall. They didn’t catch on when the likes of Toyota moved in and started building small cars and took your market. They keep building gas guzzlers. Do they not understand the majority of people don’t want these types of cars. that’s why they can’t make a buck. They don’t listen to their customer. Complete arrogance. It’s what the US is famous for across the Globe, and you probably don’t even know that. It’s a shame, once a great creative people respected by the entire world can’t see past their own nose. Like we have said before(I shouldn’t have to repeat this , but here goes), “BUILD THE PLUG-IN ELECTRIC VEHICLE, THAT IS WHAT THE PEOPLE WANT!!!!!!” DID YOU GET THAT OR SHOULD I SAY IT AGAIN.
DO IT NOW OR SOMEONE ELSE WILL.

Posted by Brad | Report as abusive

US Auto makers will fail until they can match the quality of Japanese brands. Take a look at Consumer Reports’ annual auto issue.

Why would anyone buy a car that has to be fixed three years into it’s life? This is not necessarily a manufacturing issue but also a design issue.

Yes, the US auto industry is important, but they must change or 15 years later, we’ll be having the same conversation.

Posted by Alex from Chan | Report as abusive

Jobless claims have hit a 16 year high, the market is below 8,000, and the economic news is overall deplorable. OK, so let’s add to the psychology of panic, and let a minimum of 250,000 more lose their jobs by throwing the automobile industry to the wolves of bankruptcy. These fellow Americans will stop buying and the economy will further contract, they will be on unemployment benefits which you will pay for, many will feed their families with foodstamps which you will pay for, crime will skyrocket which you will be a victim of, and families will be torn to sunder for which you will also pay the social cost. Is this really preferable to a bridge loan? It is not rocket science to see that this will be the straw that breaks the camel’s back and a downword economic spiral will turn to the whirlwind of a Depression. Please be careful what you wish for!

Posted by John | Report as abusive

Finally true, accurate and unbiased article. Majority of our society, at least it seems that way, truly does not understand the ramifications of chapter 11 for manufacturing sector with such a broad national span as the automotive industry. There is a tremendous difference between service industry without any product and long term commitments to its customers and the car industry which needs to provide warranties and services. I am tired to hear the bail-out word!! Let’s call it by its true name line of credit. I am also tired of our senators and congressman double standards and hypocrisy. It is thanks to their legislations we are in this financial crisis today. It is due to their policies that allowed converting bad loans to securities and allowing those to be insured. I have not seen any action on the part of our government or Congress to keep these financial wizards accountable for their actions. On the subject of accountability, perhaps our Congress should take a pay reduction to $1 until they manage to balance the budget!!!
The UAW workers are not paid, as many are made to believe, $76 an hour. This the burden cost to the company which includes benefits. The true earnings are in $25-35 range, which is in line with other car manufactures, another untrue misconception!!!
The economics 101, tells you that a country the size of the USA cannot and will not survive on the service industry alone. The manufacturing industry has for years provided wealth to this country. They invested into R&D, helped create and maintain small businesses, which are so vital to the overall economy. I am American by choice not by birth, and I am very proud of it. I lived in many countries all over the world and what amazes me the most is the fact the great number of born Americans take this country for granted and do not support their local communities and businesses. It is unthinkable to see top government officials or top CEO’s in countries like Japan, Germany and France driving any other vehicle than the one’s manufactured by their respective domestic automakers. The local media in these countries does not take any possible chance to pick on the local industry but to the contrary they support their national industry in an unbiased way. In closing, let’s focus on what is essential to the good health of the American industry and their people and stop proliferating the same misguided perceptions.

Posted by Peter Swiecicki | Report as abusive

It seems to me that the SUV is a great choice of car. You can carry the soccer team and look cool. That’s why they sold so well. The only reason why they stopped selling is because of $4/gallon gas.

Now that the recession has hit, gas is $2/gallon. SUVs should be selling like hot cakes. It seems to me that small electric cars are not the way to go. People aren’t buying ANYTHING now because they don’t have money. It doesn’t matter what GM puts out. Look at the port of Long Beach. Thousands of unsold, fuel efficient foreign cars are clogging the port. So please, quiet with your, “GM mismanaged and didn’t listen to the consumer.”

Posted by Mike | Report as abusive

The auto makers should file for bankruptcy and restart a non-uinion shop.

Remember Henry,
You know, Henry Ford. Who’s going to be the next Henry Ford of this new age. If you’re American and you don’t know who I’m talking about you better Google him. He created your auto industry from nil. Remember when the combustable engine was the latest thing, well Henry grabbed that idea and ran with it. The combustable engine is now the ‘Horse & Cart’, get my drift, it’s finished. The Plug-in Electric is the future, don’t deny it. Did the Government throw your tax dollar at the makers of the old Horse driven cart. Of course they didn’t, they were progressive, forward thinkers.
You all go on about getting rid of foriegn oil so it doesn’t dominate your lives. You whinge about pollution (Why do you think there’s so much cancer in the world? You know with the amount of combustable engines blowing toxins into the atmosphere(air) you are all heavy passive smokers). You whinge & whine and talk, talk, talk. Is that all you are good at. You all go to University, where are all your Engineers?
Get of your bums and do something, because the guy next to you isn’t going to save you.

Posted by Brad | Report as abusive

The auto makers along with the UAW dug their own grave years ago. Let them lie in it. The wage/benefit packages are unbelievable and, most certainly, unsustainable. Frankly, I am very tired of “too big to fail”. The industry needs to be restructured. And I know this will mean large job losses. This industry needs to join the real world and it will not be pleasant. Millions of the rest of us know about job loss as through the years we worked for companies that weren’t “too big to fail”. To save the industry is a lost cause. It has to downsize and in a dramatic way. Sooner is much better than later. The American economy has gotten incredibly bloated and now the air is leaking from a thousand holes. All we’re doing now is trying to stop the thousands of leaks with trillions of dollars. Let it leak so we can get back to a reality based economy.

Posted by Zeke | Report as abusive

I say let them sink!

Posted by Infowars | Report as abusive

Nonsense,

Give the auto industry billions now, and they’re just back later asking for more.
Repeat until we have no money to do anything at all.

Or we could put the money into transition benefits: unemployment, retraining, funding pensions if needed. In other words, to citizens as opposed to companies.

And maybe actually help someone.

Posted by John Bannick | Report as abusive

I think you should ‘Junk’ the industry,
Let the old school companies go to the Chinese or the Japanese. At least they know how to run a Manufacturing company. I think the US has become a little too Maternal. Too many mommy’s boys in charge now, forgotten your heritage.
It looks like the countries that you call 3rd world have turned the tables. Everyone might have to line up on the Chinese job que soon. How embarrassing, a World Power? To who?
If you still think that the SUV is agreat car you have major problems. Good Luck.

Posted by Brad | Report as abusive

Amen and thank you. This is a real, honest look @ the current state of affairs for not only the for the auto industry but the entire world economy. This is the biggest issue to hit since the great depression. People who believe this is a minimal issue do not comprehend the long-reaching affects of such a demise. The ENTIRE world economy relies on this industry. To assume otherwise is naive at best. Congress is the last place to look for a line of credit. Additionally, if one thinks this only affects the Detroit 3, think again. Look at Toyota idling plants as well as the retail industry looking at bleak holiday results. This is a matter of life and death for the world economy. Besides, $25 billion is only 3% of the amount given to the banking industry – without a blink of an eye. Nobody in the world should be against this loan/credit.

Posted by Frank Turner | Report as abusive

Bankruptcy for the airlines: let me think about those worthy entrants in the famed hall of bankruptcy. Braniff, TWA,Peoples Express,Northwest are entrants into that dark night. But I think I have seen some of their planes sitting on the tarmac in Arizona just the other day. I believe that tarmac is called the Resthome for Jets. So, I guess you’re right, there is life after bankruptcy.

Posted by Broadview | Report as abusive

No matter how much money had been invested, no matter what it had cost, no matter how many jobs depended upon it, on 15 April 1912 attempting to bail out the RMS Titanic would not have been a wise investment of time or money.

Posted by bill | Report as abusive

I agree with the comment about them filing Bankruptcy. Why should we the American people continue to help these people get richer. More and more business’ are doing away with Pensions, and retirement packages. It seems that if we cut the top dawgs pay, and event he employees for that matter. Imagine if every business were part of a union, the price of everything we have to have to survive would be triple the price of what it is currently. They do not need to be making what they do. Let them pay part of their own medical expenses just like every other red blooded American.

Posted by Sue | Report as abusive

If the auto industry is having a coronary, I, as a taxpayer should not be looked upon as Medicare. This IS the time for our government to impose restrictions on the use of our money. Will this $25B lead to more? GM runs 6 domestic auto companies and 6 foreign. It has partnerships with many more domestic and foreign auto companies. Is it unfair of the US to ask GM to SELL some of its foreign assets to make up part, if not all of the $25B + it and other US auto makers are asking for? When a poverty-stricken american asks for government assistance, and they had $181B in income and $55B in assets, would they get even a penny?
By the way, Toyota has 3 product lines and is the #1 car company in the world.

Posted by Tom | Report as abusive

I think we should let the auto industry fail. The author says breakthroughs are at hand with alternative fuel propulsion, but provides no evidence and no time line of ‘what at hand means’.

Secondly let the free market function. If these three companies die or come out of bankruptcy leaner and meaner, perhaps that is a better solution. Other smaller car companies might prop up given the chance and in time people will be re-employed.

I don’t believe the tax payer should help the auto companies survive. Let them do that on their own. Otherwise they will simply repeat their errors and expect another rescue in the future.

Posted by Paul | Report as abusive

It already has failed. The “economy” just pushed the failure to now instead of next year or the year after that. The only reason this has a chance of being proped up is to guarantee the Union Labor Vote. There is no other reason why you cannot be “allowed” to fail, reorganize, clean house and actualy build something that people want to buy, at a price they are willing to pay. In the old days, only the winner got to go home with the tropy, now they give them to the winer’s.

Posted by NAK | Report as abusive

Tariff all imported vehicles.

Use the monies to maintain domestic auto solvency.

Tariffs are constitutional, (not)”Free” trade agreements are not.

And govt does not take ownership in private business.

Lastly, the American consumer does NOT always deserve the lowest possible price regardless of job loss, toxic assembly, defective design, child labour, & environmental damage.

Politicans need to find the the guts to say that to the public.

Posted by OhioOrrin | Report as abusive

While I do not like bailouts, auto company bankrupcies at this time would likely be devastating to the American economy.

Those who urge bankrupcy may have conflicts of interest: The Republican party wants to kill the unions. Many hedge funds likely own credit default swaps, which will pay off if the auto companies go under. Many of those contracts will likely be paid by AIG, out of taxpayer dollars. The taxpayer would also foot the bill for failed pensions and unemployment insurance.

Congress should make the funds available to save our auto industry, with strings attached to modernize the companies.

Posted by Linda G. | Report as abusive