Michael Hlinka: The case for a Big 3 bailout
- December 4, 2008 11:17 AM |
- By Michael Hlinka
Money Talks is a daily business column from CBC radio.
By Michael Hlinka, CBC business columnist.INTRO:
Maybe we won't be referring to the Detroit-based automakers as the Big Three for very much longer. Yesterday, the United Auto Worker Executive met to discuss what concessions that they are willing to make to save at least some jobs, and more importantly, the companies they work for. There is every indication that a deal will be struck and a multibillion-dollar lifeline will be granted ... and sooner rather than later.
If that sounds like a lot of money – it’s because it is. But I think it’s important to look at that number in the proper context.
The United States government recently authorized a direct infusion of capital of $25 billion US into several different financial services companies. When you spread the money the U.S. car companires want over the United States population, it amounts to something like $100 for each American taxpayer. When you think about the dislocations to the U. S. economy that bankruptcy might present, it may indeed be money well spent.
The central issue is very basic: The Detroit Three's current business model – which includes a wage structure of $70-something an hour, too many different lines of cars, and a bloated dealership network – is unsustainable.
There’s a new reality over the horizon: Fewer people will work for lower wages. General Motors is talking about reducing its blue-collar headcount from the current level of 96,000 to less than half of that over the next four years. A smaller workforce means fewer cars being made: GM has already indicated that it may sell or even close its Saab and Saturn brands, and its dealership network could shrink by 2,000 in the near future.
What does all this mean for automobile manufacturing in this country?
Our federal government is faced with a difficult decision: Will it keeping throwing money in the form of subsidies towards the Detroit 3, while they continue to shrink. Or should its strategy be to get out of the business of subsidizing them, minimizing the fallout in the process?
The fact is that Canada is not big enough to save GM, Ford and Chrysler. The truth is that there are better ways to use our scarce resources. Playing out in front of us is the possible death of the Detroit 3 in Canada.… and if we’re smart, we’ll bury the corpse quickly.
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