(March 21, 2009) Nothing lasts forever. Still, the likely fate of General Motors or Chrysler, if not both, takes a curt slap at history. Immersed in the global financial crisis that began in 2008, both corporations are clinging to virtual threads - and federal bailout funds - in their efforts to remain afloat.
Could the legendary Big Three automakers mutate into a slimmed-down Little Two - or, horrors, even shrink to a single survivor? Namely, Ford, which appears to be on more solid financial footing than its Detroit rivals?
Surely, the ghosts of such early industry giants as William C. Durant and David Buick must be in a state of turmoil these days. Almost a century ago, in 1908, Durant established General Motors, folding in such rising-star makes as Cadillac, Buick, Oldsmobile - and later, Chevrolet. Over the ensuing decades, GM evolved into the global powerhouse of the auto business, assumed to be virtually impervious to machinations in the marketplace.
Now, just as GM is finally bringing the revived Chevrolet Camaro to market, and the plug-in electric-powered Volt isn't much more than a year away, GM looks to be on the brink of collapse. Such a prospect would have been unthinkable at any previous point in the company's history.
When GM chairman Rick Wagoner and his counterparts at Chrysler and Ford appeared before Congress in November 2008, initially arriving via corporate jets, some observers thought he should have had a letter of resignation in hand. Many have accused GM, even more than its domestic competitors, of ignoring or denying the realities of the changing world for years - indeed, for decades. Rather than push hard for fuel-efficient, smaller vehicles, GM (and the other domestic manufacturers) continuned to concentrate instead on bigger, high-profit models. Even now, as crisis loomed, it wasn't clear whether that state of denial had finally evaporated or continued to persist.
Few industry or media observers have faulted GM's vice-president of product planning, Robert Lutz, in even the slightest degree. After all, Lutz was and is a "car guy." How could he possibly do wrong?
During Lutz's tenure, it's undeniable that GM has greatly improved the quality of its products, and offers a number of fuel-efficient models. Yet, Lutz also continued to push those gargantuan SUVs and big, rumbling V-8 engines, claiming (as did most industry leaders) that they were simply giving the public what it wanted. Lutz's remark early in 2008 to a group of reporters, handily dismissing global warming with an expletive, did not enhance his image with critics - inside and outside the company - who realized that GM had been stuck on an incorrect course for years.
Walter P. Chrysler's spirit could be at least as uneasy, if it's aware of the current status of the corporation that he established under his name in 1924. Long known for engineering excellence and innovation, Chrysler Corporation began its downward slide during its temporary tie-in with Daimler-Benz. Now, if anything, the "new" privately-owned Chrysler organization sits on even shakier ground than GM. For one thing, few (if any) new models appear to be in Chrysler's pipeline, apart from some possible rebadged Fiat vehicles that could be marketed at U.S. dealerships.
Several months back, observers of the domestic automotive scene appeared to take the news of a possible GM/Chrysler merger with a surprising degree of unconcern. Because the financial news out of Detroit has been so dire since last summer, perhaps nothing comes as a surprise anymore. That potential joining of forces fizzled in a hurry, replaced by muttering of Chapter 11 bankruptcy for GM and a curious new relationship with Fiat, of Italy, for Chrysler.
Meanwhile, of course, both corporations have been feeding at the trough of federal bailout money, measured in billions, with even more funds needed if the companies are to remain solvent and functional. Already, $17.4 billion in bailout money has been issued to GM and Chrysler. As of late March, the two faltering companies are seeking an additional $21 billion.
As many analysts (including Tirekicking Today in prior Editorials) have suggested, tossing more billions at either company won't necessarily prevent ultimate failure anyway. Bankruptcy or collapse could occur after all those billions have been disbursed and spent.
Besides, the AIG debacle in March 2009, whereby avaricious traders who were largely responsible for that organization's disastrous failure were rewarded with million-dollar bonuses, has reduced the likelihood of more bailout funds being issued without tight scrutiny. AIG is different from the automakers, of course, in that it's now 80-percent owned by the federal government. So, those bonuses come from taxpayer money. Still, the very idea of bailout billions has taken on a distasteful stench in the eyes of much of the public, and members of Congress. President Obama faces monumental hurdles and unyielding resistance from Republicans and others when he tries to drum up support for either the next stiumulus package or additional bailout funds.
Will the Detroit automakers survive and once again prosper, if on a far smaller scale? Considering that so many foreign auto manufacturers are facing comparable financial losses and diminished sales, the likelihood of significant recovery anytime soon appears minimal. Not until more Americans start buying automobiles and other products is there much chance for a shift in the financial charts. With thousands losing their jobs every day, and millions worrying that they're next, it's tough to convince anyone that this is a time to buy anything.
Besides, that isn't likely to happen until banks and other lending institutions start providing credit once again. Additional bank failures and restructuing are a virtual certainty, so the ones that remain solvent (for now) are fearful to dip any toes into the lending waters.
As President Franklin Roosevelt told Americans in 1933, "We have nothing to fear but fear itself." Trouble is, fear is one of the toughest obstacles to overcome. Are you prepared to do your part and buy a new automobile or other high-dollar item? Before making such moves, are we sure that's what will help America, and the world, turn the financial corner?
We do indeed live in interesting times; and those times can be painful in so many ways.
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