Auto Industry Bailout Again

When announcing his support plan to the Canadian branches of General Motors and Chrysler, Stephen Harper commented on a “regrettable but necessary measure.” His words were totally appropriate. Car manufacturers do not deserve the billions of public funds that are placed at their disposal, but, on the other hand, losing hundreds of thousands of jobs that depend on those companies cannot be allowed. Taxpayers have done their share for the market. It’s now up to the companies to do their share.

The Canadian and American governments recently gave more than $21 billion to Detroit’s “dinosaurs”. And that is just the beginning! To save these big “saurians” who have forgotten to evolve, dozens of extra billions will be needed. To cut a long story short, American cars may cost you a great deal of money, even when you don’t buy them.

Ottawa and Washington have laid down conditions so that public funds are properly used and could be recoverable. That won’t be enough. If we want American car manufacturers to have a professional future, everyone has to participate. Especially those depending on them to survive.

In the United States, the United Auto Workers Union gave priority to important grants on the global compensation of its members. This is just a start. A call to every partner’s involvement was heard, the Chairman for Canadian workers in the car industry said on Saturday. He repeatedly pointed out that the unionized workers’ demands are not responsible for the crisis. It is no time to go looking for who is guilty; it is time to find solutions.

Washington’s position is firm: by December 2009, the compensation of American unionized workers will have to attain the same level as for workers for foreign car manufacturers in the U.S.

If unions agree to such conditions, it is hard to see how they would accept more generous contracts in their company’s Canadian factories. Ottawa would already have to do much to save GM and Chrysler’s jobs in Ontario. The Canadian unionized workers’ stubbornness would jeopardize their efforts.

The CEOs of the three major companies have already agreed to an annual salary of $1, in exchange for financial support for their companies. They would have to go much further that this symbolic promise, all other executives will have to lend a hand.The usual logic that the best workers would go to work for competitive firms [if they were not paid more] no longer stands in the present context. Employment perspectives in this business are rather limited and they are not much better in other fields.

Suppliers, who employ large numbers of workers in the auto industry, must also be ready to renegotiate their prices downward. Maybe the drop in some raw materials – especially metals and oil by-products – will make that task easier.

Despite all these efforts, some American car manufacturers will have no other choice than layoffs, reducing the number of dealers, and, diminishing the number of suppliers.

This should convince others of the urgent need to negotiate.