Oct 232008
Authors: Alex Stephens

The great American legacy of Ford, General Motors and Chrysler (a.k.a. the “Big 3” automakers in Detroit), might be coming to a close.

In recent news, investor confidence in each of the three has fallen sharply. Ford in particular has seen the least of the slump in auto sales, down 17.4 percent from last year compared to Chrysler, which is down 25 percent. But Ford is also losing one of its major lifelines of support.

Billionaire Kirk Kerkorian, who is known for having built a financial empire through Las Vegas, Hollywood and automobiles, is pulling away from his investment in Ford.

Last April he began investing in Ford in hopes that his influx of cash would provide the company much needed capital to make expensive changes in order to stay competitive in the auto business. Instead, Ford has miraculously continued to fail, losing about 75 percent of its stock value within the past year. Kerkorian’s $1 billion investment at $7.73 a share is now worth $2.43, almost a 71 percent loss.

When even the rich uncle bails, you know you’re screwed. The Big 3 are forecasted to go bankrupt within a year if the trend of losses continues. And by all indications, it probably will.

America’s fickle infatuation with gas-guzzling SUV’s in the 1990s and early 2000s might have given a false impression to automakers. Why else did they stick so fervently to a market driven by low gas prices and blatant environmental disregard? It wasn’t until a few weeks ago that GM tried to sell off its Hummer brand.

Too little, too late, I say. Combined with foreign competition of companies that had the foresight and wisdom to know fuel inefficient cars would soon be scorned, our automakers are headed for the unemployment line.

I thought that’s how capitalism worked. Companies compete with each other, which drives new technology and efficiency, which ultimately yields a better product to the consumer. Companies that can’t keep up drop out of the game. In this case, Asian automakers are driving domestic auto makers out of the business because of newer technology combined with our inability to compete. Or are they?

The much debated economic bailout package included an early Christmas present for our auto homeboys — $25 billion in rescue finance.

In America the trend seems to be this: when times are good, businesses tell government to shove it, but when times are bad they beg for help and forgiveness for being incompetent, greedy pigs.

As much as I think our automakers should get what they deserve, the repercussions of letting them go under would be disastrous. Through direct employment, the Big 3 provides more than 200,000 workers jobs that include healthcare benefits for families and pension packages for retirement. Indirectly, they provide a backbone to some 20,000 auto dealers nationwide, which in turn employ hundreds of thousands of jobs. All would likely become unemployed if our government refused to doll out some of that shiny corporate welfare.

It’ll take more than an assured lifeline of cash to recover. The cash reserves of both GM and Ford are being eaten away at an astounding rate of $1 billion per month. And that’s even taking into account cutting jobs and wages.

Yes, the market for auto sales is declining across the board, and yes, it makes sense to cut jobs when sales are down, but without bold leadership and a vision to do what it takes to stay afloat, no amount of money will cure the cancer of American automakers.

Alex Stephens is a junior political science major. His column appears Fridays in the Collegian. Letters and feedback can be sent to letters@collegian.com.

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