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With so much hupla over potential for a government bailout pundits and politicians are quick to point an ignorant finger at the many wrong reasons that placed us in this mess to begin with. Few if any, are discussing the historic facts at the core of the domestic automakers current crisis. The industry was set up right, but has been locked in and unable, not just unwilling, to change their now antiquated business model & structure.
The domestic automakers were born in the very early 1900’s, they weren’t started IN the industrial age, the WERE the industrial age. These companies grew rapidly into becoming the economic engine that fueled America’s great growth. To serve the population dealerships were needed in every community for sales and service. This industry revolutionized the economic world as well as the social world. Cars made travel affordable and efficient, keeping people connected and making the world a smaller place much like social networks of today.
In the 50’s and 60’s the interstate highway system was built out, to the pleasing of the auto industry lobbyists. With easer means of travel the need for cars increased, but so did competition, which severely eroded dealership margins.
Honda and Toyota didn’t enter the US market until this time, and really didn’t gain significant traction until the 1980’s. Because their infrastructure was built out decades later and in a completely different economic era, their businesses structures are very different than the domestic’s. Most notably they have far fewer dealers, especially when looked at the ratio of dealers to car sales. Also, they are also not weighed down by the UAW, which was formed in 1936 (however smaller unions date back to the late 1800’s.) Global competition has caught up to the American factory worker and these corporations can no longer afford to pay the benefits afforded through the past century given global competition.
Letting these plants move over seas should be out of the question, despite the potential short-term benefit. Out-sourcing the domestic’ manufacturing would be a national security disaster. During the past Word Wars the auto plants we converted to building tanks, planes and other vehicles for the military. Could you imagine if WWIII ever happened and we had to outsource our military vehicles to china? YEA RIGHT!
There is no doubt the industry has some pains ahead of it as it goes through a much needed correction but there is a silver lining to this gray cloud. Restructuring (even with a Chapter 11 reorganization of some sort) could provide some HUGE long-term benefits to the US auto industry. Even though the industry is changing and that is painful, it must look at it as an opportunity. New business models could sprout creating a wide array of benefits for those inside the industry and those that consume our products and services. There is lots of uncertainty in the market right now. However, one thing is certain, as long as American ingenuity and entrepreneurship is alive and well the domestic industry will survive and reinvent itself into the world wide powerhouse that it was and deserves to be.