The U.S. auto industry needs a 21st-century makeover. Its future depends on automakers finding the money and resources to quickly deliver a new generation of fuel-efficient and alternative energy cars such as the planned Chevrolet Volt that can commute up to 40 miles a day without using gas and can net 100 miles per gallon on some hybrid trips. But facing a deep recession and credit freeze that have hobbled their industry, they can't raise capital fast enough to overhaul their operations. A sizable loan approved by Congress recently to help drive this transformation may amount to too little, too late.
But this industry is worth saving: If General Motors, Chrysler and Ford go bankrupt, it could mean the loss of hundreds of thousands of jobs within the companies and tens of thousands more employed by dealerships and suppliers, dealing a heavy blow to the gut of the American economy. Some may call it socialism, but the American car companies are worthy of government help to survive a crisis not entirely of their making. After committing more than a trillion dollars to rescue banks and other financial institutions from the credit crash, it seems only fair that lawmakers find the additional dollars needed to save the auto jobs that have helped to fuel middle America.
True, GM, Ford and Chrysler continued to profit from selling gas-guzzling SUVs and sedans while defying protests from environmental activists. But that strategy made economic sense until very recently. Then, the collapse of the housing bubble, soaring oil prices and an ongoing credit crunch hit the auto giants with devastating power.
Now, most Americans are hoarding their cash, afraid to buy new cars, and many who are brave enough to shop for a ride are discovering that they can't get an affordable car loan. As a consequence, more than 700 dealerships have closed their doors this year, sales of new vehicles are expected to fall by 30 percent this month compared with last October, and GM is losing $1 billion a month.
Yesterday, Chrysler said it would lay off a quarter of its salaried employees, and GM stock led the race to the bottom as the Dow Jones industrial average plunged. What sold last year for nearly $40 a share ended the day at just under $6. . Executives of GM and Chrysler have been talking in recent weeks about a merger, but industry analysts say that would only replace two faltering companies with one very large weak company.
Lawmakers from Michigan, home to the big three and several auto suppliers, last month helped arrange up to $25 billion in low-interest loans from the government to help the industry retool plants and build fuel-efficient vehicles. But it may take as long as a year to distribute that money, and that may be too late to provide meaningful assistance. Sen. Carl Levin of Michigan has said he may seek another $25 billion in loans in a lame-duck session after the election. Congress should act quickly on that proposal and speed the retooling aid to help the carmakers stay afloat.
More than half a century ago, Charles Wilson, president of GM, was famously misquoted as arrogantly telling a congressional committee, "What is good for GM is good for America." But now that sentiment rings true: This troubled industrial giant deserves another chance.