RANTS #457

August 6, 2008

Crunch time for Detroit - and the nation.

By Peter M. De Lorenzo

Detroit. After all of the hand-wringing about product, all of the second-guessing and Monday morning quarterbacking about what the Detroit automakers did or didn’t do to arrive at the predicament they find themselves in, it has come down to this: The Detroit Three do not have enough money over the short term – the next two to three years - to 1. Weather the financial storm caused by the collapse of the SUV and personal use light truck market. 2. Bring new, more efficient vehicles to showrooms (while converting former pickup and SUV plants to build them), and 3. Accelerate the development of advanced technology electric and plug-in electric vehicles in order to get them to showrooms in a timely fashion.

Let’s contemplate those words again: Not enough money, as in the necessary cash to survive as an industry during this, the biggest production transformation/conversion since World War II.

I have made light in recent months that the two presidential candidates are in this state so frequently now that I half expect one morning to see one of the candidates delivering my newspaper (Barack Obama was here in Michigan Monday, John McCain was here yesterday), but now, there’s nothing funny in the least about what’s going on in Michigan or in the domestic automobile industry.

This industry, one that still either directly or indirectly accounts for between 1 in 12 and 1 in 14 jobs in this country, is teetering off the edge of a cliff, dangling by a thin thread of “If we can just hang on until 2010, things will be better.” But it’s clear now that things won’t be better for the industry two or three years down the road if it can’t survive long enough to stay in business in the interim. And it’s also now becoming very clear that the domestic automobile industry won’t be able to survive without some sort of government-sanctioned short-term loan package.

Obama was in Michigan on Monday touting $4 billion in guaranteed loans and tax credits (McCain hasn’t weighed-in on the subject as of yet) for Detroit, but that is a mere drop in the bucket compared to what the domestic automobile industry actually needs. Estimates are flying around behind the scenes and in the media as to what this all might really cost. How does $8 - $10 billion for revamping the plants just to get these new electric vehicles built sound? Or how about another $25 - $30 billion on top of that over the next three years just to keep these auto companies afloat and out of bankruptcy? Tom Walsh, who writes for the Detroit Free Press, researched that “$40 billion” figure, and it’s a mind-numbing number.

That the politicos in Washington are finally becoming alarmed as to what a wholesale implosion of the domestic automobile industry would do to the country is why the subject of guaranteed short-term government loans is suddenly part of the presidential debate. Whether you believe that the Detroit automakers deserve help or not, there’s no question that the consequences of inaction would be dire for the economy and the country.

So here we are. After all of the posturing and the hand-wringing that I referred to at the beginning of this column, the reality is that one of America’s key manufacturing industries is down for the count. It does little good at this juncture to rehash how we arrived at this point, because what matters now is what we, as a country, are going to do about it.

Do we collectively shrug our shoulders and say “they” – as in Detroit - deserved it and go out and buy more Toyotas, Hyundais, or whatever the next automotive flavor of the month from the Pan-Asian region is?

Do we, as a country, continue to underwrite the long and painful downward spiral of our nation as we watch industry after industry relegated to second-tier status because of our lethargic “whatever” attitude and our abject refusal to understand the end-of-life-as-we-know-it implications of the continued erosion of our manufacturing base in the new global economy?

Do we continue to operate as a loose confederation of “Balkanized” states, at odds with each other across the country at every turn, while turning our backs on our fellow citizens as long as it doesn’t directly affect our day-to-day lives? After all, it’s much easier to refer to what’s going in this industry as a “Detroit crisis,” or a “Michigan problem” or one of those issues for the forlorn “flyover states” instead of what it really is – an American problem – and one that will deeply affect all of us if allowed to continue.

Or do we, as a nation, learn about and come to terms with the issues involved and work to understand the Big Picture implications, and then resolve to do something about it through our representatives in Washington?

I’ve said it before in The United States of Toyota and repeatedly in this column, and I don’t mind saying it again today: We, as a country, cannot exist as Starbucks Nation alone. We cannot come to the table in this new global economy only as a nation of slothful consumers, a people who have completely lost the ability to create or manufacture things – and even worse, the will to muster the energy to care - because once we lose that, then the day we lose touch with the basic fabric of our nation won’t be far behind.

And make no mistake about it, once that happens, other nations will be glad to start dictating our quality of life to us in no uncertain terms.

Sound appealing? I didn’t think so.

The state of Michigan is on the front burner in the presidential campaign of 2008, that we already knew. But now the fate of this country’s domestic automobile industry is in serious jeopardy, and the catastrophic implications to our national economy if Detroit goes down are almost too staggering to contemplate.

And how each of these presidential candidates responds to this crisis will be telling, for Detroit, this region and the nation.

Thanks for listening, see you next Wednesday.