Governments Get Ready To Bail Out The Big Three
In Ontario our biggest employer is the auto industry. Everybody knows some one who either works in the auto industry or a support industry. The death of the auto industry in Ontario is unthinkable. The economic fall out would be devastating. That’s the big reason why our governments aren’t going to let that happen. Last week both the federal and provincial government stepped up with an aid package to save it.
Of course it is contingent on our American friends doing something for their industry. Last week the US Senate stopped any bailout of the big three. So this week it looks like the White House is going to do some creative financing to bail the auto companies out. No matter. It’s pretty clear everybody understands. If you let an industry so big go down the economic impact would be apocalyptic for some regions of North America.
I concur with huge government injections of capital to save these automakers. I cannot see vast stretches of Ontario turning into some economic wasteland. I cannot see Canadians who have bought GM, Ford and Chrysler vehicles being without spare parts and a dealer network. So call me crazy. I know there are a lot of people out there who don’t agree with me and would like to see the market do its work. If that means the big three go bust, so be it.
Obviously there are problems with the big three automakers. For instance why reward companies, which build cars the market doesn’t want while offshore automakers thrive in comparison? Shouldn’t the big three automakers have some strings attached to the government money to motivate them to do a better job? I think so. However, we might be splitting hairs here. This industry is so far gone; the damage, which has been done, might never be undone.
I’m the big three’s problem. Some of you know my car history. I own three vehicles and one of them is American. However, my two cars are both Hondas. The reason that I have two Hondas is because I had such bad luck with my Chrysler car back in the 1980’s. After 156,000 km, it was costing me so much money I couldn’t get rid of it fast enough. However, what to do? I’d heard the Japanese cars were good, so why not try them? So I bought a Honda Accord, which I had until this year. After that I bought a Honda Odyssey, which I still have along with a Honda Civic. The first Accord went over 450,000 km before I got rid of it, my present Odyssey has 480,000 and my Honda Civic has 190,000 km.
So I am their problem. I’m still making the American auto industry pay for their poor quality of the distant past. They are clearly in my rear view mirror never to go back. However and this is a big however, my day job requires a truck. For 23 years I drove a 1984 Dodge pickup, but in 2007 it finally gave up the ghost and I bought a Ford F-150, my first American vehicle since Ronald Reagan was President.
My F-150 is a very basic truck. It does the job for me. However, it uses too much gas and the paint is flaking off the F-150 signs. In fact it’s flaking off everywhere it shouldn’t. That’s why I remain their problem. Rewarding mediocrity with more sales doesn’t make any sense. Unfortunately for the big three auto makers they got into their financial trouble with their eyes wide open.
Nonetheless, the world doesn’t necessarily see things the way I do. Other people have had good experiences. Hondas and other foreign models have their problems too. The point is regardless of the way you feel personally; North American automakers need a lifeline.
The Americans are going to come through sooner or later. According to Kristine Owran of the Canadian Press, Federal Industry Minister Tony Clement said Friday the federal and Ontario governments have agreed to provide the equivalent of 20 per cent – proportional to the number of vehicles produced in Canada – of whatever emergency aid the Bush administration gives to General Motors, Chrysler and Ford. So hope is on the way.
Permanent job losses are sure to follow bailout or no bailout. Some estimates are saying even with a bailout, the US could lose 100,000 jobs and Canada 20,000 with the majority of those in Ontario and Quebec.
When the bailout if finally made, there will be much gnashing of teeth. Everybody will be pointing fingers especially other industries left untouched by government largesse. However, keep in mind this industry is Ontario’s big enchilada. They don’t necessarily deserve the aid, but they must get it. Hopefully their road ahead will be better managed. The next time around greater society might not feel so generous.