Big Three’s Unstable Financial Future is Frightening
Nov 11 2008 by Sara Lacey
The American automotive industry is in dire straits. This isn’t breaking news, but it is freakin’ me out. Trust me, I’m not here to place blame or point fingers. I’m just a little worried about the idea that the auto industry could collapse. Trying to figure out what Chrysler, Ford and GM’s third-quarter losses mean is kind of stressful for me, because I’m more of a word girl.
I did some homework to help me better understand this situation. While the financial reports had lots of scary numbers, I found an L.A. Times article that really helped me grasp what it would mean if one of the Big Three automakers doesn’t survive.
A Center for Automotive Research report found that the failure of a Big Three automaker would “wipe out 2.5 million jobs and $125 billion in personal income in the first year alone,” according to the article. OK, that’s not helping me stay calm, L.A. Times. In addition, the Big Three have relationships with parts suppliers that make things like seat belts and windshields that could be hit very hard by a Big Three failure. Those parts suppliers have businesses that supply goods to them, and so on; I don’t think I have to explain what a domino effect is.
If struggling parts suppliers raise their prices, other automakers, such as Honda or Toyota, could be hard-pressed to get the goods they need at the prices they budgeted for. Even though these automakers aren’t in bad financial shape like Ford, GM and Chrysler, they could still be forced into a risky position.
On Monday, president-elect Barack Obama met with President Bush and they discussed the auto industry’s financial problems, according to an Associated Press article. Sources told AP that Obama stressed to Bush the importance of immediately helping the auto industry.
In September, Congress approved a $25 billion loan to automakers to fund the development of fuel-efficient cars. But the loan might not arrive in time or be enough to help the Big Three, according to the L.A. Times. It’s a very intricate problem, and the solution seems to be even more so. Ford CEO Alan Mulally said the company has “sufficient liquidity” and they weren’t pinning their future on government money. But that’s today’s environment; what about tomorrow’s?
User Comments
They would have been doing fine if their executives and union workers work as a team instead of enemies and union stop being selfish and greedy. Also their executives stop traveling on private jets. Let them go bankrupt and have someone young and fresh to run the company. Retire those that design cars that no one wants except themselves. Look at Buick and Oldsmobile cars, those that buy them are 60 and older. Tiger Wood could not even entice any young to buy.
It is too late for the tax payers to help them. $25B will only last a year or two and they will ask for more again and behind the closed door they will laugh at the tax payers.
seriously, where would we be without the big 3? Those vehicles are in our blood! We write songs about them or songs that talk about them; old 55’, Little Deuce Coupe, Main Street. Nevermind the jobs, the money, the downfall of the big 3 would change the United States. We no longer would be who we are. We would be one of those countries we are always helping.