Auto Industry Collapse

Updated: March, 2010

The U.S. Auto Industry Collapse

The U.S. auto industry is far too important to be allowed to fail. Millions of jobs in supporting industries depend on the auto makers so they can’t be allowed to fail - no matter the cost. Since over two million jobs depend on them so they’ve been added to the burgeoning list of too-big-to-fail institutions.

Problem is, no matter how successful the bail-out is, the industry as a whole will never again see the kind of sales and profits that were so common even five or six years ago.

"If one of us fails, all of us will fail."
- Alan Mulally, CEO Ford

The other problem lies with the leadership of these firms. These CEOs have run their companies into the ground, haven’t responded to market challenges and now these same failed CEOs expect tax payers to trust them to revive and rebuild the same industry their incompetence destroyed. We clearly need a new set of corporate leaders with an entirely new vision.

But an even more important factor has to do with health care costs. In Japan and Europe the governments shoulder the costs of their universal health care systems.

But here in the U.S. car manufacturers are forced to add around $2,000 per car to the sticker price to cover employee and retiree health care insurance costs. This puts them at a substantial disadvantage when they attempt to compete with the best small car makers on the planet.

In the past Americans commonly bought new cars ever three to five years. They enjoyed driving a newer more reliable car and wanted to keep up with the Joneses next door. This was American consumerism at it's best.

But remember – each Detroit job lost will inevitably trigger several additional layoffs in the many industries that are dependent on the auto firms. A staggering one in six American workers has a job that depends directly or indirectly on the auto industry so you can expect the unemployment rate to climb.

No doubt the U.S. car industry will survive in some form but you can expect it to be a mere shadow of it’s former self. It’s golden age will forever lie in it’s past.

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