Should the Automotive Manufacturers Receive Additional Bail-out Funds?

For may years, I lived in South-eastern Michigan, home of the Big 3. I have first-hand experience of the impact the automotive industry has on an entire region of our country. However, the Big 3 are only a fraction of the regions economic equation. According to the Original Equipment Suppliers Association, in 2004, our nations 3000 automotive suppliers accounted for 783,00 jobs. The Big 3 account for 239,000.

Automotive suppliers are responsible for most of the 15,000 parts that go into every automobile. While the name plates may say General Motors, Chrysler or Ford, Industries like electrical engineering, sheet metal stamping, plastic injection molding, iron foundries, rubber, textile and glass manufactures, provide the components that comprise the final product.

The jobs generated by these suppliers are not high-paying , with generous benefits or lucrative pensions. They are, bread and butter, blue-collar jobs that drive regional economies from Michigan to Kentucky. It is estimated that over 90 percent of the earnings from these jobs are immediately returned to the economy through expenditures for every day living expenses.

The expenditures support a host of community foundation industries. Groceries, home improvement centers, clothing retailers, services and entertainment, even municipal tax bases are all inextricably tied to the automotive manufacturers.

If the Big 3 fail, entire communities and counties, with no other industries to support them, will suffer catastrophic collapse.

Should we invest an additional ten, twenty or forty billion dollars to prevent this collapse? No. The collapse is inevitable.

An influx of cash, no matter how substantial an amount, will not correct the the cause of the crises in the automotive industry. While it is true that the national economic slow-down resulted in reduced car sales, a reduction in sales would not cause a solvent corporation, with billions of dollars in annual sales, to fail. Their impending failure, is the result of poor strategic planning, a bloated corporate structure, lack of vision and greed. The slowdown only unveiled pre-existing financial instability and poor management.

Is it only a coincidence the request for a bail-out, coincided with the decision by the federal government to consider funding a stimulus plan? Did they not recognize their fiscal condition prior to that? If they did, why weren't they taking any corrective measures? The Government should not have needed to require them to develop a plan to correct their circumstance as a condition of the bail-out. They should have already had a contingency plan in place. If they didn't have a contingency plan, then they certainly should have had a plan in development once recognizing they had a problem. Only three months later, they are requesting an additional bail-out, and threatening bankruptcy if they don't receive it. Their claim is that in a few months, they went from thriving global corporations, to impending bankruptcy, avoidable only by a second multi-billion dollar infusion of funds, that coincidentally corresponds with the announcement of a second stimulus plan.

The bail-out will only serve to sustain failed corporations, for a little while longer. The solution is not additional funding, but rather, a corporate restructuring to correct the existing, ineffective business model and intellectual insufficiency.

Unfortunately, the workers and communities that depend on the automotive industry will be impacted adversely by the demise of the industry. But to regain our global position as leaders of automotive manufacturing, a reduction in size and scope of the Big 3 is necessary. To mitigate the adverse impact, it would be more prudent to to direct the bail-out funds to finance retraining of the displaced work force, in viable job sectors like technology, education and health care.

Peter J. Hester, Sr.