Less than 60 days after Congress passed the historic 700 billion dollar bailout package to aid the failing financial sector, the nations’ three largest automakers last week strolled to Washington for their own piece of the pie. The CEOs of GM, Ford, and Chrysler boarded their private jets only to literally beg the Senate to hear their pleas for funding upwards of $25 billion or bankruptcy was inevitable.
After decades of refusing to innovate in new technology for fuel-efficient cars and laying hold to powerful labor unions, the American auto industry’s collapse is long overdue and if Congress grants them this bailout, it will be destroyed indefinitely in the long run.
The argument that has been presented by both these companies and by leading economists is that if these companies are denied the funds and are forced to file bankruptcy, up to 3 million jobs will be lost – possibly devastating the Midwest and the already anemic economy.
Thus, given the evidence on both sides, the question still lingers: Should we or should we not grant them this bailout?
I, personally, feel that a bailout will only delay the inevitable and give Detroit another chance to continue with the status quo – massive burdens placed on them by the labor unions, continued product inferiority and more job losses – all a result of failed management. As I see it, the harsh reality is that regardless of whether or not Detroit receives this bailout or not, jobs will be lost because the automakers are, simply, too broke to sustain the salaries of their employees.
Bankruptcy will force the “Big Three” to restructure themselves in a manner they have not needed to do for 50 years. It will force them to recruit new management, balance their debt sheets, and invest in innovation for “green” technology – the future of the auto industry given the instability in the global petrol market.
Most importantly, it will give them the opportunity to once and for all break away from the labor unions that have controlled them for far too long. I am not saying that the labor unions should be terminated; however, there must be a healthy medium between guaranteeing employees their rights without having to meet hefty unreasonable wage demands. As a result, they could finally reduce the price of their cars, which are currently $2,000 more than any other major competitors, on average.
Congress has granted Detroit until early December to present a more formidable plan proving that the funds would save the industry from disrepair. Nonetheless, with the infamous financial bailout still fresh in the minds of the American people, the Democratic-controlled majority will find it hard to justify another “rescue” package.
The “Big Three” used to be the face of American industrialism because they produced quality cars at low prices and at an unprecedented rate. It is in our national interest to allow them to stay afloat, but we must do so in a responsible manner.
As Mitt Romney, whose father George Romney saved GM in the 1950s from economic collapse, stated in his New York Times op-ed column last week, “Detroit needs a turnaround, not a check.”