A local take on a national issue

Our local paper had a great front page article today, looking at the topic of the auto industry bailout through a local perspective. And we do have one, because after decades of operation in South Bend, the largest employer in the area closed its doors. Studebaker shut down its local operations in late 1963, putting thousands out of work--and right before the holidays. This picture has always made me sad...it's the last day at Studebaker, the workers leaving for the last time.

From what I've read in various books about the company, it was a bleak time in South Bend, with many wondering if the city would survive. By that time, there were enough other companies that the city did survive the blow, but many workers were unable to find as good a job as they had with Studebaker, and many were old enough that they weren't able to find other jobs at all. Suicide rates went up. Local and state lawmakers visited Washington to plead for assistance, and they did get some, but not enough to bail out the company completely. Studebaker had always been the recipient of lucrative military contracts, beginning with the Civil War, and this kept them afloat for many years. With the pending shutdown, the federal government gave money, but not to save the company; the money went towards retraining of workers. The success of the retraining was mixed, as some workers had never worked for another company, and had never finished high school in order to go to work at the plant--for some, literacy was a problem.

The current crisis is compounded by the credit crisis, which has a broad effect on all industries and businesses. Also in today's paper was an article about a steelmaker near Gary that is going to have to lay off over 3,000 workers. The Union president is calling for government help for those workers.

This is a horrible dilemma, because while we all want people to keep their jobs, I believe that if a company no longer has a viable business plan, the government cannot continue to fund those plans that just aren't working any longer. The auto makers saw it this past week when Congress said, "This isn't good enough. You have to show us what you are going to do to make this viable again." The auto makers will need to make concessions, such as when the government loaned Chrysler money in 1979, and Lee Iacocca took a salary of $1 a year. I believe (and this is merely my opinion) that the auto makers really need to rethink how they make their cars, and part of that is stricter fuel efficiency. They should have done that years ago, but they took the easy way out and maintained the status quo, for the most part.

I am not against the American auto industry. I've never owned anything but a Ford Mustang, and I've always been satisfied with Ford's service. I think they're a fine company, and I'm happy to buy their products. But they, along with GM and Chrysler, haven't been really competitive for some time now, and they need--here comes one of those phrases that we all love to hate--a complete paradigm shift of how they operate. I believe they can still be viable companies, and I think it's time that the CEO's pony up like Iacocca did. If they truly believe in their companies, they will be willing to do so, they will work harder to turn the companies around, and they will care enough about their employees, their shareholders, and about the economy in general to do whatever it takes to reverse their companies' fortunes.

Based on some numbers that Ken is running, the federal assistance to the auto makers makes sense. Not to help the CEO's maintain their million-dollar salaries and lavish perks, but to save these great American companies and save the people who build the cars. To not do so will cost taxpayers more in the long run. The thought of Ford going under makes me want to cry. They can turn things around, but there have to be conditions, and there will have to be a lot of hard work.

I hope they're up to the task.
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Source: South Bend Tribune, November 23, 2008