Will the Big 3 Survive?

I know little to nothing about big business or big finance.  What little I do know, I have picked up over the last month of watching CNBC, almost constantly, since this major financial breakdown started last month.  It is truly scary to watch what has been happening on Wall Street and elsewhere and the various negative effects on the credit markets.  The fallout has touched everyone in some way.  I made the mistake of checking my 401(k) last week-- after saying I would not-- and my heart sank.

That said, the $700-billion bailout-- now referred to as a rescue-- by all accounts, was necessary to prevent an all-out financial meltdown.  Will it work?  That remains to be seen.  But, if lawmakers were willing to approve that kind of bailout for Wall Street, surely they should consider a similar plan to help the ailing U.S. automotive industry which, if it goes under, will destroy the U.S. economy.

General Motors, The Ford Motor Company and Chrysler, LLC are all struggling to survive.  They have each shut down plants putting hundreds of thousands of blue collar people out of work.  They have each downsized their head counts offering attractive, but certainly not lucrative, buyout packages to employees willing to accept them.  Nothing is working.  Now, this morning, comes news that Chrysler will trim its white collar workforce by 25-percent.  25-percent.  That is roughly 15,000 people.  How will those folks feed their families and pay their mortgages and car notes?  

Yesterday, I taped an interview with Republican Senator Lindsey Graham of South Carolina.  While chatting after the session, he asked where my hometown was and I told him, Detroit.  I expressed my concerns about the domestic auto industry and asked if lawmakers had been approached about coming up with a rescue package.  He looked me in the eyes and said, "we already gave them $25-billion," referring to a previously approved loan package, not tied to the big economic bailout, to help GM, Ford and Chrysler develop new technologies.  Graham also said it would be difficult to keep offering money to Detroit automakers while not doing the same for, say, BMW, which has a plant in Greer, South Carolina.

Unfortunately, it was neither the time nor the place to engage him in a debate over the issue, but my initial thought was this-- the last time I checked, GM, Ford and Chrysler are all American companies which provide the industrial backbone of the nation.  BMW is German.  

Granted, throwing money at a problem may not be the best solution but if we can throw $700-billion to bailout the mistakes of greedy speculators and others who didn't have the wisdom to see that offering loans to people who clearly could not afford them, then certainly we can do something to help the industry that accounts for millions of hard working Americans' jobs.

Now, I realize, the domestic car companies are not without blame in this.  All three were very short-sighted in succumbing to the consumer demand for gas guzzling trucks and SUVs, fueled by cheap oil and subsequently, cheap gasoline.  I must admit, I love HUMMERS.  I drove an H2 for three years and when the lease expired, I got an H3.  But, the demand for those types of vehicles is way down with gas prices spiking to more than $4 per gallon this year.  The new focus must be on more fuel efficient vehicles that can run on alternative energy.

Also sharing in the blame-- the United Auto Workers.  I'm all for people being paid a fair wage for their work, but the UAW continues to demand compensation for its members that is way out of line with how the industry is doing.  Labor costs are killing the Big 3 and will continue to do so until union leaders wake up and realize they had better agree to some major concessions.  Making less money is better than making no money in this climate.

Oh, Good Evening!