Wednesday, November 19, 2008

As Goes GM, so goes America (and a few other countries as well)

It's an industry steeped in the North American experience, the defining change of the industrial revolution and one that at the moment is facing one of its greatest moments of crisis in its history.

The Big Three (or what used to constitute such) Automakers of North America have been feeling the love (or heat depending on the questioner of the hour) as they appear on Capitol Hill in front of panel after panel of politicians, all investigating whether they are worthy of a 25 billion dollar bailout or bridge loan.

These open camera sessions have become all the rage in Washington since the economic downturn picked up its pace towards potential Armageddon. There have been the bankers, the insurance brokers and now the car makers all formerly unabashed Capitalists now becoming socialists of convenience, in a desperately increasing bid to shore up their shaky financial failings.

While the banks and insurance firm bailouts (or in some cases lack of ) had a minimal spill over effect in Canada, it would seem that won’t be the case if the US Government should decided to put the money in the automakers tin cup.

The potential bailout of the automakers has already provided for some tough questions of the three auto group chairmen, one of particular interest to Ontario is the call for the auto makers to make sure if they receive aid from Washington that the first plants to feel any pain be north and south of the US borders.

A talking point that more than anything else will probably see Ottawa try to inoculate the Canadian industry by offering up some form of aid package to the auto makers, if only to take away that particular hammer from the US government.

Whether the sabre rattling of protectionism will be required remains to be seen, the mood at the moment seems against a bailout and instead to send the most troubled of the automakers into bankruptcy protection.
But we should never underestimate the power of hundreds of thousands, if not millions of American workers suddenly forced out of their jobs, because a company the size of GM or Chrysler suddenly can’t make it anymore. From the actual auto jobs, to all the spin off industries that supply the auto plants, the potential for massive job losses is incalculable at the moment.

Beyond the creation and distribution of cars and trucks, pension plan commitments are at risk if bankruptcy should be the answer, a potential domino that few governments wish to contemplate.

On the other side of the debate, is the inability of the automakers in the past to have made the correct decisions, changed their business plans and to have made cars that consumers want to buy. More than a few suggest that it is a bed of their own making and they should face their fate like many a dinosaur of the past. One particularly high profile American former Republican presidential candidate Mitt Romney has just come out and said to let Detroit go bankrupt, as it's the only way the industry will be able to reinvent itself.
Two conflicting points of view, with as usual, the average worker caught in the middle, waiting for circumstances far beyond their control to play out.

That is why the big money stakes game of chicken is going on in Washington at the moment and why the winds of change will probably blow north into Canada’s industrial provinces as well.

While we wait for the Congressional worker bees of Capitol Hill to render their verdict and for the US Government to decide where it’s going on the file, we’ll catch up with some of the details on the state of the US auto industry, an American engine in need of a very serious tune up…

Christian Science Monitor-- A road map for Detroit
Detroit Free Press-- Let Detroit go bankrupt
New York Times-- How to Fix a Flat

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