When the Automakers Fail

December 8th, 2008 by Eric Cope

There is plenty of news regarding the Big 3 (Ford, GM, Chrysler for those living under boulders) and their bailout. I keep hearing about how they are too big to fail. This is hogwash. Lets imagine what will happen. Let’s pretend that Ford, GM, and Chrysler all close their doors on the same day. Do you think all of those workers are going to be unemployed for the duration of their remaining lifetimes? What about all of that capital now idling waiting for a new owner? The first thing those companies will do is sell off their manufacturing lines. Companies like Toyota, Honda, Kia, Isuzu, Kawasaki, and countless others will try to buy those lines for pennies on the dollar. Who do you think will work those lines? The same people who worked them before. Now, they may make less than what the made before, but some one who makes $80k/year for riveting should expect that to not be sustainable for themselves or the company. I am sorry you have grown accustomed to that amount, but its your wage’s fault for your companies failure (in addition to inept management).

Bankruptcy would allow these companies to shed their union contracts which are anchors on their business plan.  This bailout will only postpone the inevitable. Eventually, the big 3 will have to cancel their union contracts to compete, its only a matter of time.

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