From The Cafferty File Dec. 4, 2008:
A top executive at Chrysler, Vice Chairman Jim Press, is warning that the failure of just one of the Big Three automakers could drive the U.S. economy into a depression.
The CEOs of Chrysler, Ford and GM were back on Capitol Hill today asking for $34 billion in aid, just two weeks after they asked for $25 billion and were shot down.
Ford CEO Alan Mulally quoted an estimate from Goldman Sachs during his testimony that said the failures of the three companies could cost the U.S. economy up to $1 trillion.
Sure the companies need cash. And sure they directly provide jobs to 355,000 workers. And an additional 4.5 million jobs in related industries. But there are real questions about whether we would be throwing good money after bad. Detroit has failed to keep up with a changing industry for years, despite the handwriting that was clearly put on the wall by Toyota and Honda, among others. American cars come with legacy costs unrivaled anywhere in the industry. Sales figures released this week were terrible. GM down 41 percent, Ford down 31 percent. Congress is grappling with whether the cure is worse than the disease.
Here’s my question to you: Will the loss of any one of the Big Three auto companies lead to a depression?
Chris from Savannah, Georgia writes:I worked in the steel mills in Pittsburgh back in the early eighties. A regional depression occurred, with unemployment in the area around 23% when the bottom fell out the steel industry. That’s why it was called the Rust Belt. No bailout then, whole towns were devastated. I survived and have moved on. The economy and the American people are resilient. It changed the face of Pittsburgh for good. We will survive the loss of some of the auto industry and move on and possibly come out better than before.
Nancy from Tennessee writes:Detroit has waited too late to try and put out the cars that the American public wants and needs. Nothing makes me think that their new business models will work now. If the people leading these companies knew how to make a profit, they would have done it before getting down to one month before going bankrupt.
Doug from Dallas, Texas writes:It depends. If they go into bankruptcy and restructure they come out leaner with a chance to return to profitability. The country has to be prepared for the ripple effect of the lost jobs but they also have to recognize that the auto industry has been bloated for years.The only sure thing is the government can’t keep bailing them out I can’t afford it!
Kay from West Virginia writes:Loss of one will almost certainly lead to loss of the other two as their suppliers are shared. I’m unsure that anything can stop us from falling into a depression given the current state of our economy.
Colin from Redondo Beach, California writes:Not for Honda and Toyota.
Craig writes:I say let ‘em fend for themselves. Even if we bail them out, they’ll move everything off-shore anyway in a couple of years citing ‘cost savings.’