Life in the Fast Lane

GM has recently made headlines, along with Chrysler, by contemplating possible bankruptcy court proceedings. President Barack Obama has consistently been calling this a last ditch resort to even more difficult options facing the car industry. In the long run, any kind of bankruptcy protection would end up hurting the future of the American economy anyway. Shareholders will lose interest in investing with such companies and ultimately leave it with no other choice but to shutdown or file for Chapter 11 protection. According to Wall Street Journal writer Michael Levine, in a November 17, 2008 Op-Ed , there are indeed ways that bankruptcy would ultimately mean the end of GM:

“reorganization under Chapter 11 of the bankruptcy code. If GM were told that no assistance would be available without a bankruptcy filing, all options would be put on the table. The web could be cut wherever it needed to be. State protection for dealers would disappear. Labor contracts could be renegotiated. Pension plans could be terminated, with existing pensions turned over to the Pension Benefit Guaranty Corp. (PBGC). Health benefits could be renegotiated. Mortgaged assets could be abandoned, so plants could be closed without being supported as idle hindrances on GM's viability. GM could be rebuilt as a company that had a chance to make vehicles people want and support itself on revenue. It wouldn't be easy but, unlike trying to bail out GM as it is, it wouldn't be impossible.”

What of our autos now?

It is easy to look at the issues presented on this blog about why/how the car industry is failing and point out the obvious. American cars are too expensive, the workers who make them are unskilled and underpaid, the executives who run the companies care about shaving expenses by outsourcing jobs. These are their problems, and we as consumers and more importantly taxpayers are picking up the burden that should be felt by the companies themselves. There is little we can do to directly save the industry besides vastly overpaying for the cars. The problem can only realistically resolve itself from the inside. The recession on the other hand is out of their control. The American automakers should stop and ask themselves, "What is it about the Toyotas and Hondas of the world that are so much better than ours?" "Should we be investing more in alternative methods of fuel consumption?" Until these changes can be met, the car industry in America has to wait to be 'built for the road ahead'

Different Perspective

Just thought this was an interesting report. this follows an Al-Jazeera English report chronicling the decline of Flint, Michigan. Interviews are conducted by Sebastian Walker with the head of the UAW division in the city.

Outsourced

It could be said that the outsourcing of the American car industry is what inspired other American companies to do the same thing. Outsourcing is when a company sells part of itself to another country. Traditionally, this is done to save money on employee salaries, safety standards amongst other factors.
Looking at outsourcing in regards to today’s economy it could still seem profitable, but then again it would only deepen America’s portion of the recession. The main problem that was facing the car industry was that we had to negotiate firing workers with cutting back production/costs both of which are bad for us in the long run. The United Auto Workers of America (UAW) have, and continued to this date, tried to prevent the production of auto parts from being shipped overseas with little success.
Now there is a big uber-technical economic explanation of why this is so bad, but I’m just going to simplify it. Outsourcing leads to job loss and at times of high inflation (i.e. now) this creates larger unemployment making finding a job that much harder. The jobs that are sent overseas, in terms of the auto companies, are the general assembly line jobs such as screwing on bolts and checking the durability of a certain car part, jobs that tend to be given in America to slightly undereducated and unskilled laborers, something that benefits the value of American companies when they pursue and overseas option.
So far companies, such as Ford and GM, have outsourced to countries like Australia, Mexico, and even India. Why do these companies feel that they still need to produce outside of America? Why not just hire skilled laborers in our own country? Now I have said before that people are traditionally stupid. In a market that calls for skilled labor we feel some need to be more interested in careers in banking, public service, doctors etc. But if people really want to save the economy they should look for a career in the auto industry because that is really the key to the recession, we need more exports to counteract the rising imports.