A setback in Congress for the bailout moves of the US carmakers has raised fears of an industry collapse that would jeopardise millions of jobs and have knock-on effects worldwide. The car companies say one in 10 US jobs are tied to the sector.
The big three have lost out to foreign manufacturers, many of whom build their vehicles elsewhere, but Detroit – where Henry Ford invented production lines for making cars – is still heavily dependent on the industry. General Motors has 81,000 workers there, Ford 61,000, Chrysler has 43,000 and one of the biggest parts suppliers, Visteon, has 22,000.
But French analyst Alexander Law said not all of the big three may survive: “There’s a real risk one of them will fall by the wayside, but the problem it is that this current crisis isn’t something that’s happened overnight, it dates back five, 10, 15 years. There were strategic errors made, they let costs get out of hand, they were too generous and spent too much money.” Back in the 50s almost all the cars sold in the United States were built there, but now fewer than half the vehicles bought by Americans come from GM, Ford and Chrysler.
Critics of the plan to bailout the big three say it would only temporarily postpone inevitable bankruptcies, because they have failed to keep up with changing tastes, continuing to make gas guzzlers even as fuel prices soared. In return for any government bailout money, the companies would have to pledge to reorganise and become more competitive. But the incoming Obama administration also knows that it cannot afford the job losses that would come with the collapse of any of the big three.