Big Three presidents appeal to Congress

Possible auto aid program under short procedural deadline

Representatives of the three American domestic car makers, General Motors, Ford and Chrysler, appeared before the U.S. Senate Banking Committee on November 18 to make their plea for government help. By all accounts, the reception was not friendly. And Congress was scheduled to adjourn until the new year on November 21, making approval of a bail-out unlikely.

The package being debated would be worth $25 billion (US) and would provide loans to keep the Big Three liquid. (Chrysler claims it may be out of cash before the end of the year, GM next year; only Ford does not expect to need the funds.) It would also certainly contain job guarantees and all three companies have sworn that all the money will be spent in the U.S. Which explains why Canadian government officials have traveled to Detroit and Washington to co-ordinate its efforts with those south of the border.

Not surprisingly, many are blaming the unions in both Canada and the United States for the situation in which the auto companies find themselves. Others are blaming corporate executives. Few seem to recognize that their criticism is more moral than economic and may entirely miss the point.

The fact remains that, without either external support or an improvement in the economy, some or all of the auto makers will soon be facing bankruptcy. The question decision-makers need to ask themselves is whether they can allow an industry that employs an estimated seven million across North America to die and be replaced largely by foreign imports.

Within the framework of a restructured auto industry capable of existing alongside stronger and more numerous competitors, unions will almost certainly be required to cut deeper than they already have. Wages and benefits will be the first target; improvements in flexibility and output will no longer be enough to restore the industry to health.

The economies of the West since the Industrial Revolution have been powered by increased productivity and specialization in manufacturing. Since the Advertising Age, a lot of our growth has resulted from the purchasing power of working class households. Now, our manufacturing base is eroding and, with it, the purchasing power of ordinary people.

From here, it is very difficult to imagine what the economy will look like in five or 10 years. It is easy to believe that it will be worse than it is now; that instead of increasing affluence we will be faced with poverty. In this scenario, the stubbornness of union members nostalgic for a past of job security and wage increases will be the least of our worries.

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