US Economy: Big Three Bailout - General Motors, Ford, and Chrysler

By: CaraTan   Date: 5 December 2008

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CaraTan

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Detroit, 5 Dec. First the most powerful banks in the US were “too big to fail”. Now the same is said about US automakers General Motors, Ford, and Chrysler. The moral hazards continue.

The US economy emerged on a global scale at the end of the Industrial Revolution in part due to the US auto industry. Popular trivia says that Henry Ford manufactured the first mass-produced cars on an assembly line, but in fact it was Ransom Eli Olds with his Oldsmobiles. He pioneered the process to mass-production via specialization and a moving assembly line. Either way, American cars have long been a sense of pride in the US, and have endured as one of the country’s economic cornerstones.

American cars personify America and its people. Loud, large, powerful, and over-consuming, they are fitting in a country that prides itself on doing things its own way. They typify a nation that is self-sufficient and independent; one that is unashamedly different and bold. American cars are central to the identity and even ego of Americana.

Rickety Model-T Fords worked in cities and farms alike. Jeeps led American troops through World War Two trenches. Flamboyant ’57 Chevys took high school kids to drive-in movies and drive-through burger joints. Muscle cars of the 60s and 70s such as the Ford Mustang, Chevrolet Corvette, and even the Oldsmobile 442 were every teenager’s dream. Bo and Like of the Dukes of Hazzard drove a 1969 Dodge Charger, ingraining the shape and sound of that car into the minds of millions. NASCAR was one of the fastest-growing spectator sports of the 90s, and these all-American cars could reach the same speeds as Formula 1 cars.

Suffice to say, American cars are ingrained in American culture, and have been for a hundred years. They are American culture. So the prospect of the Big Three going bankrupt or dying off is terrifying to many Americans. Certainly, this is exactly how the auto manufactures want it, and these fear tactics are part of their case in a bid to get a US $34 billion bailout. (Although Mark Zandy, from Economy.com estimates this figure to be closer to $125 billion).

But resistance from both the public and Congress is strong. Many complain that these US manufacturers have been producing inferior-quality products which consume too much fuel and they therefore don’t deserve a bailout.

It’s not fair that millions of average working Americans – that have for so many generations supported the good old American auto industry – have to suffer when petrol prices increase because their 1989 7.4L Suburban only gets 11 miles to the gallon. Being loyal has its price – much more fuel-efficient models are available – but most are made in Japan.

Even Tennessee’s republican senator Bob Corker echoed this sentiment, suggesting that these automakers do not deserve the rescue after consistently lagging far behind more efficient and better-made foreign brands. He questioned why US taxpayers should bail out Chrysler when the private equity institution that commands 80% of the firm was not willing to put any more of its cash in.

The Big Three didn’t help their case when their CEOs took private jets to DC to plead their case. New York Representative David Ackerman told the CEOs of GM, Chrysler, and Ford, “There is a delicious irony in seeing private luxury jets flying into Washington, D.C., and people coming off of them with tin cups in their hand, saying that they're going to be trimming down and streamlining their businesses.” This was at a hearing of the House Financial Services Committee.

"It's almost like seeing a guy show up at the soup kitchen in high hat and tuxedo. It kind of makes you a little bit suspicious. Couldn't you all have downgraded to first class or jet-pooled or something to get here? It would have at least sent a message that you do get it."

Michael Moore, the highly controversial, opinionated liberal political commentator is unusually conflicted. As the son of automotive assembly-line worker from Flint, Michigan, the heart of the US auto industry, the failure of GM, Ford, or Chrysler is certainly not what he wants. But Moore insists these manufacturers have not been producing what Americans want – it has been more of an attitude of ‘you buy what we make’.

Moore said in a CNN interview, “…General Motors has had this philosophy from the beginning that what's good for General Motors is good for the country. So, their attitude was we'll build it and you buy it. We'll tell you what to buy. You just buy it.

Eventually, the consumer got smart and said, 'You know what, I'd like a car that gets a little better gas mileage. I'd like a car that's safer on the road,' so they started to buy other cars. General Motors still wouldn't change. They still kept building the wrong cars, and more and more people stopped buying them.”

Tony Escobar, EconomyWatch.com 

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