Issue date: 11/19/08 Section: Opinion

Media Credit: Rick Nease/MCT [Click to enlarge]

Ford, General Motors and Chrysler need our help to get back on track and make America strong again
Kyle Kershner

If the Big Three collapses, it would be a devastating blow to the economy and would affect us all, as one in 10 American jobs is related to the automotive industry. That is why a bailout is necessary.

This week, Congress may consider giving the auto industry part of the $700 billion Wall Street bailout during a lame-duck session, according to the Associated Press.

There is no perfect solution here, but a bailout seems to make the most sense to help avoid yet another gut-punch to the economy.

We're talking about an industry that supports millions and millions of people. A collapse would trigger significant ramifications. The government must be aware of this - they were right there to bail out Wall Street, now they should step up and assist the automakers.

President-elect Barack Obama said that stabilizing the auto industry was a high priority for his team, and he and President George W. Bush discussed the broad health of the industry, according to the Detroit Free Press.

General Motors, Ford, Chrysler and the United Auto Workers have asked for $50 billion in aid for the industry. Half will be used for general business, while the other half will be used for retiree health care, according to the Detroit Free Press.

The Associated Press recently reported that the collapse of the Big Three, or even just General Motors, could initiate a snowball effect in the economy, eliminating up to three million jobs and holding back more than $150 billion in tax revenue to the government.

The companies clearly need help. The price of GM shares have dropped roughly 90 percent and is now considered a "junk" stock.

With the aid of the government, it doesn't necessarily have to be the be-all, end-all for the automakers. Restructuring, including consolidation of engineering and design, as well as making the plants more efficient would definitely help them get back on the right track.

It might require laying people off, but that number is nowhere close to the three million that would lose jobs as a result of the collapse.

Chairman for the Center of Automotive Research David Cole said Detroit is losing money because there are too many factories making more vehicles than the market is buying. GM also has too many product lines that overlap and compete with one another, which ends up hurting the company.

Cole said auto makers will see more profits (about $2,000 per vehicle) as the factory cuts take effect because there won't be nearly as many excess vehicles.

There is the chance that, with some help from the government, the total destruction of the Big Three can be avoided, and these auto makers can get back on the right track.

The Big Three have been shoddily run and yet another bailout would only delay the inevitable
Jordan Guinn


Ray Zalinsky of "Tommy Boy" said it best, "America's in a state of renewal. We've gotta have the strength to tie a few factories to a tree and bash 'em with a shovel."

Let the invisible hand of the free market slap some sense into Ford, Chrysler and General Motors. This is easy to write from thousands of miles away, but the facts speak for themselves.

These companies have been terribly run for the better part of two generations. When the country faced a gas shortage in the early 1970s, the automakers ignored the warning and continued to churn out gas-guzzling behemoths. To this day, the leaders of the companies seem oblivious to consumers' wants and needs.

America needs a strong industrial base. No country can be self-sufficient without one. Unfortunately, the crumbling automotive industry is virtually all that remains of our once booming industrially-based economy.

But using taxpayer money to prop up poorly-run businesses is not the answer.

There is no simple solution to this problem. If we bail out the Big Three, then General Motors will likely merge with Chrysler and hundreds of thousands of jobs will be lost. If the free market is allowed to do its thing, at least one of the trio will file for bankruptcy. That scenario will also see hundreds of thousands, if not millions, of jobs lost.

But bankruptcy may not be the worst option at this point. Part of the reason the American automakers are in so much trouble is because it pays its workers too much to be competitive.

The United Auto Workers has slowly been killing the state of Michigan for decades now. Workers have benefits and pay that is unmatched throughout the automotive industry. While that is admirable in theory, the Big Three do not sell enough vehicles to cover its overhead.

The bailout would actually set Michigan backwards. It's not na've optimism to say that Detroit can rebuild. As the people in Southern California know right about now, when you have to start over at the foundation, you can build it back the way it should be. If the country needs change, Michigan needs an overhaul.

Even though he is not calling the shots yet, President-elect Barack Obama needs to request more from the Big Three than just fuel-efficiency standards. We need to destroy some union contracts and get rid of the clueless suits who ran these companies into the ground.

The bailout is a lose-lose situation. Bankruptcy will cost jobs and is an undeniably cruel fate for the workers who are in no way responsible for the manufacturers failures, but it may be the most sensible option for Michigan in the long run. Sometimes you have to cut off the hand to save the arm.

Jordan Guinn and Kyle Kershner can be reached at opinion@statehornet.com

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