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The Honolulu Advertiser
Posted on: Wednesday, November 12, 2008

No blank check for struggling automakers

There's no doubt the Big Three U.S. automakers are in serious financial trouble. They are hemorrhaging cash; General Motors predicts it could run out of money by mid-2009 and have to shut down.

The failure of one or all of them threatens a huge number of jobs — auto executives fear 3 million — not only in Detroit, but for the companies that do business with Ford, Chrysler and GM.

It's inevitable that the federal government will step in to help. Congress has already approved $25 billion in low-cost loans to help the industry meet higher fuel-economy standards.

But Detroit and the United Auto Workers union want more — another $50 billion in loans to keep the companies solvent and protect UAW members' retirement and healthcare benefits.

President-elect Barack Obama and congressional leaders support swift action to help the auto industry. But such help should be contingent on the industry's willingness to change its business model.

Detroit has brought much of its current troubles on itself through its now-unbearably high labor costs and its persistent failure to make cars people want to buy.

In 1970, the Big Three's share of the domestic market was 86 percent; in 2005 it was 42 percent. In Hawai'i, the trend is more stark: In 2008, nearly 80 percent of new retail light-vehicle registrations will be for vehicles from companies other than the Big Three.

Government can't fix this problem alone. But if it proposes to help, it must insist the industry invest intelligently in the future — with high-mileage, high-quality vehicles (including all-electric ones), and labor costs that are more competitive.

Otherwise, taxpayers will be just be throwing good money after bad.