Op-Ed: Automakers Cry Broke

In the 1950’s and 60’s in America the car was king, Americans were in love with their automobiles and the companies that made them. It was a source of pride to own a Ford, Chrysler or Chevrolet and consumers swore the brand that they owned was best.

The imprint of the American automobile industry was no clearer than on television and at the seminal event of corporate excess in the 1960’s, the New York World’s Fair. On the three major television networks automobile brands were prominently pitched as program sponsors and at the Fair in New York their pavilions stood as a monument to U.S. industrial might. How things have changed. Now they have experienced a deep fall from their days as industry giants. Today the heads of the Big Three auto makers – Ford, General Motors and Chrysler – are making a third, and most likely final attempt this year, to convince Congress to back a $34 billion aid package (up from their earlier request for $25 billion in assistance) to avert collapse of the industry. They appeared before the Senate Banking Committee led by Senator Christopher Dodd (D-CT). It is a last ditch effort after the executives of the companies committed a major strategic blunder when they arrived in the nation’s capital the last time via their corporate jets. The symbolism behind such waste in the time of a recession was not lost upon lawmakers who raked the executives over hot coals for their seeming indifference to the economic realities. The message got through as the CEOs returned, more contrite and seemingly prepared to make major concessions to obtain financial assistance. The reasons are many for the dire straights of the industry. Some of the pain is self inflicted out of years of producing vehicles that were not fuel efficient while foreign competitors churned out gas saving models. Not only was the competition producing more economical vehicles, they were churning out cars that were more aesthetically pleasing and technologically advanced. Detroit has also had to deal with higher labor costs as unions demanded high wages and healthy benefits and foreign competitors were not bound by such labor agreements. In addition, the so-called “legacy costs” imposed upon the industry by generous health care benefits for retired auto workers have cost companies billions of dollars. With consumer credit at a standstill and workers losing their jobs, the auto industry is particularly feeling the effects of the downturn as auto show rooms have become ghost towns. The result has been an industry with slumping sales and drowning in red ink. The industry now faces an uphill battle as many Members of Congress, including skeptical Democrats, have little sympathy for companies that are viewed as arrogant and some legislators believe are simply paying the price for bad business decisions. For Democrats on the Hill the decision on whether to support a bailout for the auto industry is complicated by the strong support labor has showered upon party candidates and the fact that President-elect Obama has indicated his strong support for an aid package. Many Members are also paying attention to public opinion polls that are weighing heavily against the car manufacturers. What is true is that if the U.S. auto industry does collapse the ripple it will create will feel like a tsunami far beyond the Motor City. Many Americans do not have a sense of the reach of the industry and the millions of jobs connected to the manufacture of automobiles in this country. By some estimates the industry touches upon as many as 12 million jobs in the nation’s economy. Detroit’s collapse would be the economic equivalent of a massive coronary, sending the economy to uncharted depths, perhaps obliterating the housing market and creating untold pressures on the nation’s fragile system of social services, including health care. With the congress quick to Bail out the bankers, they should realize the real necessity of saving an American institution.