So this is how it ends for Detroit? After more than a century of putting the world on wheels, the American auto industry collapses amid squabbling over clueless CEOs and their private jets? Not necessarily. There is another way forward: the Big Three could become the Big One.
The notion of three powerful U.S. automakers is already an anachronism. These companies are husks of the mighty institutions that once ruled the road. Now they control less than half the U.S. auto market and will lose a combined $30 billion this year. Collectively they are burning through nearly $6 billion a month, and General Motors and Chrysler warn that by the end of the year they'll be broke. They'll head back to Washington this week (ideally by car pool) to beg for a bailout.
But Detroit actually has parts worth saving. Melding them into a single entity could buff up its best brands, like Chevy, Ford and Cadillac, while leaving the clunkers (Pontiac, Mercury, Saturn, et al.) by the side of the road. It would take a healthy dose of Nietzsche's "creative destruction," but that's preferable to total destruction, especially when you're talking about an industry that supports 2.5 million jobs. Other major American industries have undertaken calamitous consolidations to survive. Why should Detroit be spared from market forces?
Like autos, foreign competition laid waste to the American steel industry. Beginning in 1986, more than 35 American steel makers went bankrupt. In 2002, billionaire investor Wilbur Ross agreed to buy up bankrupt LTV Steel, setting off a merger frenzy that saw 17 companies shrink down to three, while financial results reversed from a $1.1 billion loss in 2003 to a $6.6 billion profit in 2004. Ross used the bankruptcy courts to renegotiate labor contracts and hire back a fraction of the workers.
Read Article