Goodbye Big 3

My latest article in the School Newspaper The Advocate


Detroit's Big Three - Ford, Chrysler, and GM-are once again marching on Washington, begging alms, for what will turn out to be one more taxpayer expense. Apparently, they have learned their lesson when it comes to public perception: Last week was a public relations nightmore for the automakers when it was revealed that the corporate fat cats were flying in on multi-million dollar private jets. This time, however, they will be driving a fleet of 'green' cars from Detroit to Washington. It seems much better, of course, to drive hundreds of cars 500 miles to show how they are becoming more fuel efficient.

These guys are becoming much better at begging for handouts, while getting worse at building cars.

One question no one seems to be asking is, if Congress does throw another $25 billion into the proverbial money pit, will this actually make the Detroit automakers any more efficient? Doubtful, since the main goal of Congress seems to be to incentivize automakers to be less efficient rather than more.

For example, the previous $25 billion promised to the Big Three was for retooling their factories in order to produce more eco-friendly cars. This was congress's promise to America to promote a greener nation. The problem is that U.S. consumers have not been inclined to purchase these cars - especially not anymore, with declining gas prices.

This will spur the American carmakers to come back to Congress in the future for another $25, $50, or even $100 billion. They would simply tell lawmakers they complied with all the stipulations on their money, and now they are in financial striats, again, because consumers don't want their products.

So what should be done? How about allowing these companies to fail? This isn't little league baseball, you know, where everyone is a winner. Sometimes failure is a good thing. We have forgotten that The Big Three only account for about 50 percent of car manufacturing and sales in this country. The other 50 percent is produced by Honda, Toyota, Nissan, and others. In fact, these companies have several factories all across America (employing over 100,000 Americans), pay American taxes, contribute to charity, the list goes on. Yet they are not seen on the steps of Congress asking for help. These companies are also suffering from a decline in demand, but instead of continuing to pour money into vehicles Americans no longer want, they shifted resources in order to create vehicles consumers would actually purchase.

The failure of one or more of The Big Three will obviously displace some workers and cause a slight downturn, temporarily. However, it will also allow for those resources that have been allocated inefficiently to find more efficient venues in which to rest.

This tradition we have of only buying American is absurd. In a global economy we should be looking for the best deals. Also, if Americans are to subsidize some automakers, why not give that money to the more efficient automakers to help them continue to be more efficient? General Motors is reportedly bleeding $6 billion a month - how long is this $25 billion really going to last these three companies?

It's time to do what the steel industry did at the beginning of this century: consolidate. Where there were 12 steel factories producing 75 percent, there are now three producing 80 percent, and this has been their most profitable decade ever. it's time to say goodbye to the Big Three and hello to The Big One.