Bailing Out The Auto Industry

The word from Detroit is that the automakers are increasingly desperate. According to published reports and industry analysis, GM will be out of cash by the end of 2008. Ford says it has enough cash to continue operations until mid-2009. Chrysler is currently a privately held corporation, waiting for a buyer.

Should tax dollars be used to bail out GM, Ford and Chrysler? In a word, yes. GM and Ford have been playing the game for more than 100 years. In that time, they've contributed far more to American prosperity than most other companies could ever hope to.

Building cars is nasty business. If you've never been to an auto assembly plant, I highly recommend that you go. They're big. They're loud. They're hot. They smell bad. The work is dangerous and it consumes the people who do it. And yes, those are the modern factories. The old plants have all been shut down.

If you've never been inside of an assembly plant, you'll be astounded by the real estate they cover. In some ways, they're like little covered cities. At peak production, they can run 24 hours a day, seven days a week for months on end. Few plants operate this way today, but the capacity is there.

Some of the most dangerous jobs are handled by robots. Lifting, welding, and moving are all prime candidates for robotic assistance. But make no mistake about it - people work in and around the cars as they're being built. The assembly process is complex, and if you ever have the chance to watch it, you'll never think the same way about an automobile again, nor about the people who put them together.

Washington should be concerned about the state of the American auto industry, because just as it has contributed to America's prosperity, it is also contributing to its decline. The auto industry is more than just GM, Ford and Chrysler. It's also the thousands of suppliers who work with the makers, and the dealers in every city in the nation. It's the small business owners, like shops and restaurants around the plant, and the businesses that thrive because people who work at the plants are an active part of the local economy.

While the rest of the country is dealing with 6.5% unemployment right now, Michigan is struggling with 9 percent unemployment, largely because the automakers are shedding both salaried and hourly workers like an old skin. The City of Detroit is a shell of its former self, and once-prosperous cities like Flint and Saginaw are all but dead.

If you think Detroit is irrelevant to American prosperity these days, you're wrong. Detroit has a role to play in the management and execution of both the transportation and energy policies of the country. By assisting the struggling auto makers, Washington will ensure that control of these vital American policies remains in American hands. Don't get me wrong. Washington would be right to demand accountability from the executives at GM, Ford and Chrysler, and foolish not to. They should accept nothing less. In my mind, accountability means no executive "performance" bonuses, no perks, no stock options, capped executive salaries, and severely reduced management staffs.

But if you think Washington doesn't "owe" Detroit and the Great Lakes region anything, think again. This region has been disproportionately negatively affected by trade policies like NAFTA, which encouraged firms to ship manufacturing jobs to Mexico and other overseas locations, and provided nothing in return to the workers who were left behind. Shuttered factories that at one time employed 40,000 people dot the landscape here. Aside from the jobs they once supplied, many cities and towns gave long-term tax breaks to the factory owners. The tax burdens were shifted to the residents, but when the factories and their jobs left, the tax burden stayed behind, with fewer people to shoulder it.

It's not just Detroit, either. You'll find the same stories repeated in New York, Pennsylvania, Ohio, Indiana, Illinois, Wisconsin, Minnesota, Missouri, Oklahoma, Texas... the list goes on. Don't be foolish enough to think that the demise of the American auto industry will have no impact on you because frankly, it already has. To borrow a phrase, " As Detroit goes, so goes the nation."

Photo Credits: Katherine, Jurlacher, Derek Farr