Tumbling Trio

News of the Detroit Trio tumbling their way to bankruptcy is all over the news; with the $700 billion rescue package cleared by the congress every one wants a share of the pie. We have seen CC companies like American Express willing to forgo the freedom they had and to be much regulated and in their operations, to fall in lines with the rest of the banking sector only to get the slice in $700 billion. This was the most dramatic turn of the sub-prime effect so far, or so you think.

Does Transamerica ring a bell? Not many among us (I being an ardent NPR follower got to hear about them in an evening broadcast) might have heard about them. Transamerica is a Dutch insurance firm that operates in US. Keep in mind a DUTCH firm. Unfortunately they aren’t eligible to ask for $$$ from the rescue package because they are not federally regulated. What is the innovative way to become eligible – take over a low key bank that is federally regulated!

Dire means taken to get funding. Which gets me to thinking – Should the Detroit TRIO be rescued?

The trio represents the American acumen in manufacturing and specifically in automobile industry. Right from the day when Henry Ford rolled his model T to today it has been a roller coaster rider for all the three. The irony is model T performed at an average of 28 mile/gallon. With advancement in technology and more than half a century later there is not one model that the three produce that beats the performance of model T! Sad state of affairs indeed.

Somewhere down the line leading up till date these companies lost track of what the common man wants. They thought as long as they banter the slogan of patriotism people will buy cars. Every possible improvement was made to the car without having looked into the actual reliability and cost of ownership of these behemoth vehicles. The sole thinking was bigger the better. This strategy worked for a few years but when people started realizing the true cost of owning these vehicles when compared to Japanese counterparts, the patriotism campaign wasn’t after all selling many cars. Today we are at a juncture where in all the three have complicated union structure and massive unsold inventory never seen in the history of America.

After union negotiations and cost cutting, inclusive of downsizing these companies they are all at a juncture where unless some drastic measure is taken they might not see the light of 2009. When the $700 billion package was announced – I for one thought it was a lot of money ( for the most part I was counting the number of zero’s in a billion!). But in today’s economic crunch $700 billion doesn’t look like much if banks, automobile, credit crunch, insurance, mortgage all or any or few of these sectors have to be rescued.

If the Detroit Trio is allowed to fail then the losses will be in lines of 1.1 – 5.5 million jobs. This is taking into consideration all the related industries that directly or indirectly work with the auto industry. Right from companies that make tires, paints, parts, suppliers, couriers etc. Last but not least DMV, highway tolls and the list goes on, oops almost forgot ExxonMobil, Shell, BP.

Today we do know that the war fought in Iraq is going nowhere; we are not fighting terrorism but indeed creating terrorists of future. There are three wars being fought Iraq, Afghanistan and most likely new inclusion - Pakistan. Every month the cost of fighting the Iraq and Afghanistan war together stands at $16 billion. The country spends $16billion on wars that are not fetching anything. We jumped into it without knowing the compete facts and are paying a price by not able to support the very industry that forms the core of the US mobility.

For crying out loud the whole country was designed to sell cars, right from town planning to DIY network relies on the fact that everyone on America will have ( not own) a car as soon as s/he is 16.

Do you think the Fed should bail out the auto industry? If not. Why? After all AIG was saved with an unprecedented $125 billion ( and counting). Then why not the auto industry? Do we now discriminate among the lines of blue collar and white collar jobs? Or you think they have been saved enough and need to fall and file for bankruptcy to get on track!

Whatever you stance, I am sad that we had a government that has got us to a point that our investment in Iraq is beyond any sanguine comprehension. We can’t pull out of it even if we want to. While the whole economy is sinking – would you be able to guess one company that’s still reaping benefits? ------------------------------ How does Halliburton sound?

Common Joe.