For millions of years, dinosaurs roamed Earth. Due to overwhelming environmental change, these giant lizards dropped like flies, unable to adapt to their new surroundings. Sixty-five million years later, a new breed of dinosaur roams in the hulking form of auto-giants, who now have come to the same ultimatum; adapt or die.
The “Big Three,” comprised of General Motors, Ford Motor Company and Chrysler, have been taking hit and after hit since the turn of the decade. In 1998, they held a 70 per cent market share in the United States and Canada. Today, that share has veered off to 47 per cent.
Although everyone feels bad for the thousands in Detroit and Ontario who have lost their jobs, somewhere, an industry critic is saying “I hate to say I told you so, but . . . ” By the late 90s, experts knew, and said, that sales of American SUVs had reached top speed and were beginning to coast.
Still, Detroit put the pedal to the industry’s metal and churned out gas guzzlers, tough on the environment and on the pocketbook, but great for companies’ bottom lines. All the while, Japanese automakers began cashing in to a less profitable, but growing market, with smaller, more efficient cars.
Even to this day, North American automakers keep touting the merits of their gas-draining behemoth vehicles, showcasing auto-motives fit to be Urban Attack Vehicles, in television advertisements.
Those commercials probably aren’t as effective as one may hope, since GM, Ford and Chrysler executives recently pleaded to Washington for a second multibillion-dollar bailout package this fall.
Although the first $ 7.5 billion bailout passed with little debate, the second one, worth $25 billion, will have to weave around some obstacles, because many lawmakers don’t see the upside of giving a hand to an industry that is undoubtedly failing.
No one is arguing the fact that the Big Three are in real danger of bankruptcy without government intervention. But even with a large cash infusion their unfortunate situation will likely not be remedied.
In many ways, the current situation is reminiscent of a crisis Britain’s auto industry faced in the 1970s.
Throughout that decade, and into the 80s, the British government bailed out its cash-strapped Leyland car company, handing over sums to the tune of $17 billion in today’s terms. Nowadays, British Leyland (which went belly up in 1986) is rolling in its grave while hearing news of similar plans in the United States.
The heads of GM, Ford and Chrysler are hoping Washington turns a blind eye to that chapter in history, because of the economic crisis, of course – consumer spending is down, the economy is in a recession and that’s the excuse for everything these days.
With experts estimating that one in 10 American jobs are tied to the auto industry, the impact of the Big Three’s bankruptcy is virtually immeasurable. But so are the handouts to which Washington would be committing itself by offering a second bailout to keep the industry from steering into the gutter.
President-elect Barack Obama says he doesn’t want to write a blank cheque to the auto sector, but where will he draw the line? It will take a mammoth shift for car buyers to largely turn to American automakers again.
What’s the worst that could happen? After extinction came evolution. And after the dinosaurs, humans actually stood on their own two feet.
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