Oh, How the Mighty Have Fallen

I never thought I would see the day when General Motors, one of the most powerful corporations in the United States, file for bankruptcy. GM has enjoyed financial dominance for as long as I can remember. But that’s what happens when a nation goes through a major recession. Companies go under. Even the mighty ones.

Chrysler, another big automobile producer, filed for bankruptcy on Apr. 30. They have been significantly reduced and now are joined with the Italian automobile company Fiat. The newly structured Chrysler will now aim to build more fuel efficient vehicles in an effort to survive in this new anti-petroleum world.

Should we blame those global warming enthusiasts for destroying the auto industry as we know it? That’s being a little harsh, but the fact that Americans are no longer purchasing large gas-guzzling SUVs certainly didn’t help their cause. Chrysler and GM’s demises can be traced through a combination of folks not buying large fuel-inefficient cars, people not buying cars period, and the rough economy. So, Chrysler and GM are victims of the recession. And what caused the recession? Those greedy banks. Oh Wall Street, how much do we loathe thee?

It is unknown how many people will lose their jobs as a result of these bankruptcies. Thousands have been the initial predictions. 20,000 to be exact. The Obama administration and the Treasury Department gave GM a June 1 deadline to create a restructure plan. As it turns out, this plan will grant taxpayers a 60% share in the new GM. This is amazing considering the United Auto Workers union owns 55% of the new Chrysler. As many as 100,000 additional jobs may be lost if dealerships are closed. Employees directly connected with GM are not the only ones who suffer. People responsible for selling and making car parts also suffer indirectly.

All this means that Obama’s plan to bailout the auto industry has partially worked. The companies cannot be completely saved, but at least they can still breath. Most companies that file for bankruptcy never see the light of day again. GM and Chrysler are given second chances. This is good considering thousands of jobs are at stake. When you consider the human aspect just as much as the economic factors, this is no laughing matter.

Also no laughing matter is the fact that the New York Stock Exchange will no longer list GM stock prices. GM can also say goodbye to being listed on the Dow Jones Industrial Average. This is the final stake in the grave. When the stock markets no longer care about you, that’s when you know you’re really dead.

So what does this all mean? In this short run, a lot of people are going to be unemployed in the Detroit/Auburn Hills area. High unemployment means more government assistance is necessary to make sure these families can provide food on the table. Social strife will follow, along with higher rates of depression, crime, family troubles, and community disharmony. There will be calls for more government spending in covering healthcare costs, as if these calls are not happening already. Labor unions will grow in power as they will be asked to carry the burden of providing basic pensions. Foreign companies like Fiat will increase their hold on domestic labor and will be able to set the agenda for the future. In other words, things are not looking good.

During the Bush administration when outsourcing expensive jobs to India became topical fodder for late night television, more American jobs were being sent overseas because companies didn’t want to pay them livable wages. Why pay an American an actual salary when a foreigner with a lower cost of living will do it cheaper? This outraged many, especially those whose jobs are being outsourced.

But today we are seeing a very different format of outsourcing: instead of jobs being sent overseas, foreign companies are coming here to get a slice of the crumbling pie. Fiat and other international creditors (China, anyone?) are now in a position to make decisions that will guide the agenda of previously red, white, and blue corporations. Chrysler and GM will now make smaller, more fuel efficient cars. This should go well with the Obama administration’s plan to increase corporate average fuel economy (CAFE) standards even more than it is.

Conservatives are spinning with rage at all these developments. The federal government is taking part ownership of private companies. American corporations are being owned by foreign organizations. The free market system of Reaganomics seems to be failing right before our very eyes. Labor unions are getting very cozy with the new Democratic administration. People are losing their jobs. CEOs are losing their jobs, which means they won’t be able to make generous donations to the Republican Party anytime soon. Oh the horror, the horror.

But when the going gets tough, you got to do what you got to do in order to survive. We should be troubled by what is going on. Bailing out private companies does set a bad precedent. In the future, if other large corporations fall victim to a bad economy or poor business decisions, can they ask Congress for stimulus money and automatically get it? Republicans should hope not. Democrats are trying not to think about it. The rest of us are just sick and tired of everything related to the word “recession.”

Democrats should not ignore the concerns brought up by the Republicans. Though they lost the 2008 election big time, are extremely unpopular right now, and seem to have no definitive leadership, they bring up legitimate points. Spending taxpayer money in order to solidify toxic debt is a risky endeavor. Is there any guarantee that the American people will see their money again? No one can know for sure.

Republicans have brought up the possibility of splitting up GM and Chrysler into smaller companies instead of selling them out to foreign interests. Dividing these two corporations into smaller companies allows for toxic assets to be distributed at smaller values, if one company fails there will still be others to continue afterward, and it reduces the roles of both the federal government and foreign corporations in rescuing these large behemoths.

It is difficult to say whether this plan will work better than the status quo. I am not an expert at the economy enough to make a credible educated guess. All I know is that this is what is going to happen and there is very little we can do to stop it.

There can be some good to come out of all this. Really? Yes, there is. This should be a wake up call to Wall Street executives and future financiers that their poor decisions affect not just their jobs, but the jobs of others. The auto industry are unintended victims of years of greed and mismanagement. This should teach us to be more careful in the future.

Also, if newer cars can have more efficient CAFE standards and lower our dependency on producing oil, that will always be a good thing. Things will get worse before they get better. The transition from oil to less oil (and later on, wind, electrical, solar, and nuclear power) will not be easy. Proponents of this new system look to this current crisis as proof that drilling for more oil is of utmost importance. What they fail to recognize is that the rest of the world is going greener. If we don’t follow suit, we will fall behind indefinitely.

One can hope that we will emerge from this crisis stronger and more sustainable. There are some hopeful signs. People will always need cars. If we can get through this tough calamity relatively unscathed and create a whole line of smaller, more fuel efficient vehicles, people will purchase them, guaranteed. Like the old saying in “Field of Dreams,” if you build it, he will come. If Chrysler and GM build these new eco-friendly cars, we will buy them. You can put your money on that. That is, if you have money to do so.

If this whole plan fails and this recession worsens, then a new plan should come into play. But for now, let us pray this brief depression will last for only a year at the most and we can return to stability as usual by 2010 or 2011 when these new cars will be ready for the market. And then, let the free market do its thing. Let the Green Revolution be our way of getting our economy back on its feet.

That way, the mighty can reclaim their title of mightiness and we can all drive the cars that we need to. And hopefully words like “recession” and “bailout” can finally be put to bed. One can only hope.

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One Comment on “Oh, How the Mighty Have Fallen”

  1. you'll never guess Says:

    intsersting evaluation, but i fear that just these two companies producing smaller rides won’t be the end of the gas-guzzling conumdrum. i recentlty read about a loophole ib the CAFE stsndards that will allow companies to simplt upsize the vehicle in order for it to be classified under a less strict mpg rating. the tougher standards being more work to reach, it is all too likely that they will take rhis easier route, mushing up the car market and encouraging more consumption of fossil fuels. communists.

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