The US car makers are in trouble. The major players General Motors, Ford and Chrysler have all experienced a massive drop in sales and orders as the effects of the global recession and economic crisis have impacted on consumers. Despite laying off large numbers of workers these companies are on the verge of failure. The plan to provide $US 14 billion in emergency loans has been rejected by Congress due to opposition from some Republicans The rescue plan would have required the car makers to reduce debt levels, cut wages to match of the Nissan, Toyota and Honda employees based in the USA, and submit to broad government oversight directed by a car czar to be named by President Bush. Following the massive $US 700 billion dollar bailout of Wall Street it is difficult to understand the reluctance to extend emergency assistance to the car industry. Analysts say that without emergency assistance, two of the country's major car manufacturers - General Motors and Chrysler - could face bankruptcy. Both car makers have warned they are running out of cash. If these companies fail the consequences will be dire. Hundreds of thousands of jobs in the USA depend directly on these car makers. So why bailout Wall Street but not the automobile industry? Some Democrats have argued that the failure to agree on an assistance package for the car makers is a simple case of white-collar versus blue-collar bias. The Republican members who opposed the rescue package have cited union interference and doubts about the viability of the business model adopted by the US car makers. Some have argued that the car makers should be held responsible for the mess they find themselves in and should not receive help from US tax payers. This argument seems reasonable, but was this thinking applied to Wall Street? The disastrous business practices of the US financial firms and banks have resulted in the collapse of many of these companies and triggered a world wide financial crisis and recession. Yet a massive $700 billion dollar rescue plan was put in place for this sector. The US government not only intervened but has spent huge sums of public money to save these firms and purchase the so-called "toxic" debt that triggered the financial crisis. If government assistance is not extended to the car industry then the politicians will face the charge of hypocrisy. It appears likely that an alternative assistance package will be put into place. The failure of the US car makers would be a disaster. These car makers do not have the time or cash reserves to turn the situation around on their own. Some type of assistance is required. There has been some speculation that President Bush will intervene with a rescue package in the short term. This may involve the provision of emergency loans that are financed by using the fund established to assist the financial industry. Any plan to save the US car makers will need to address the fundamental problems that have resulted in the poor performance of these car makers. These issues are deep seated. It is likely that the rescue plan will require the car makers to introduce reform to the work rules and conditions to bring them in line with those of the US-based plants that are operated by the Asian car makers. It also appears that there will be a requirement that any government assistance is used to design and produce models that address the serious energy and environment issues that the world currently faces. There will be pressure to quickly introduce environmentally-friendly vehicles that are competitive with the best models produced by foreign car makers. To survive the US car makers will need to rapidly change the types of vehicles they build and the methods they use to manufacture these vehicles. In many ways the US car makers will be required to rediscover the spirit of innovation and dynamism that characterized the US industry in the early 1900s. In the period from 1900 to 1915 the US car makers such as Ford introduced innovative models and manufacturing practices that quickly established the US car companies as the world leaders. During this period of economic crisis it appears the survival of the US car makers will depend partly on the type of assistance package that is provided by the government and the conditions attached to the package. Even with such assistance the future of these car makers depends largely on their capacity to change and rediscover the attributes that established them at one time as the leaders of this industry. |
