Ford - General Motors - Chrysler. Once American icons - now the Dwindling Three.
Before I go any further I want to indicate how serious this matter is to me on a personal level. I work for a company that does a lot of business with the domestic automobile manufacturers. Many people that I am happy to call friends and co-workers depend on that business for their livelihoods. So I write with that sobering backdrop.
Over fifteen years ago I said it was not a question of "if" the domestic auto-makers would go bankrupt, it was a matter of "when". Many laughed at me at the time, but a changing world, Dephi Automotive's Chapter Eleven filing, and open talk of GM filing has dampened everyone's sense of humor on this point. About five years ago I said that the sooner they go bankrupt the better, a seemingly heartless comment, but one I stand by. Why do I say this would be a good thing? Because it is only under the operational rules of bankruptcy that these companies have even a ghost of a chance.
They cannot possibly survive the current environment. That environment has been created by forty years of self-delusion on the part of management and the union - supposed business titans who thought their massive hordes of cash would enable them to ride out any storm, or that their political "cover" would protect them. And it has been created by forty years of both of these parties living in the purple haze of halcyon days goneby, thinking they could somehow suspend economic reality.
Today, many point to the rocketing cost of gasoline, with its lethal impact on the sales of more profitable SUV's and trucks, as the problem. But while the recent trend in fuel prices is certainly a significant added pressure, they are only serving to HASTEN the end, not CAUSE it. Detroit was well on the road to perdition before gas hit three and four dollars.
So what is the cause?
GM has five former employees receiving free health care and pensions for every one current employee. Now you can debate the "fairness" of this and the "policy" of this and the "politics" of this as long as you want. What you cannot debate are the actuarial realities associated with that staggering measurement. And so today, board rooms full of managers who KNOW what is going to happen suspend their disbelief as they preside over their ever-shrinking cash reserves.
There was a time in our world and in our country when conditions could support paying people for sixty years when the span of their actual working years was half that. That time is long gone - a reality that will see play itself out across many sectors of our economic and political life in the coming decades.
It's not about politics anymore.
It's about demographics and the immutability of economic law.
