Independent Thinking Blog

Can Detroit Survive? 3 Guys, 3 Jets, and 2.5 Million Jobs


Did you ever wonder what it would be like if Barney Frank and Ben Stein agreed on something?

It happened the other day when the two men concurred that it would be catastrophic for the U.S. economy if the Big 3 automakers were to fold. That was, of course, before the 3 CEOs took their 3 corporate jets for a jaunt to Washington to ask for billions of dollars of government money. Now, who knows?

I guess “jet-pooling” was out of the question. Umair Haque points out in his Edge Economy blog that the automakers spent the 20th century lobbying against public transportation. Isn’t that an irony: cars are ubiquitous–but most of them aren’t from Ford, GM, or Chrysler.

Far smarter people than me will have to sort what to do with the Big 3, but I have a few thoughts on the subject:

1. 2.5 million jobs. That’s the estimate I keep hearing of the number of people who will be out of work along the supply chain. And that doesn’t even begin to touch the ripple effect in communities across the country. The U.S. economy can’t handle that big a shock–especially now.

2. It’s not about labor costs; it’s about selling a product no one wants to buy. I’ve heard that $2,000 per car is attributable to labor costs. But people don’t say these cars are overpriced; they say they’re gas guzzlers and unsexy–and that’s the polite critique.

3. These companies need vision and new leaders (lots of them). The current team has no strategy for viability.

I agree with both Frank and Stein: Our economy and 2.5 million jobs is too big a risk to take. But I also agree with Mike Enzi, who said that “if this package were taken to a banker with a request for $25,000, he’d send the applicant back to work to actually do a business plan.”

And that brings up the $25 billion question: is there any vision left in Detroit? From 3 guys in 3 planes, I’m not sure we have 1 person with common sense. If we bail them out without a plan to change how they do business, it’ll be deja vu all over again in a few months.

Can GM, Chrysler, and Ford restructure? What do you think?

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