by Mj Ferruzza

Created on: February 17, 2009

Recession? Depression? No! We are in a Correction. We can not pretend to live like millionaires with no money down. A family that makes $40,000 a year can not live in a $400,000 house and borrow against that house 20 times over. This is a correction. We now know that you can't pay for things that you cannot afford. We can not pay people a wage they do not deserve.

And, concerning the auto industry, we cannot pay workers $30 an hour to make cars. Cars are not worth it. A $26,000 car driven off the lot is worth $16,000 minus what they say with title, tags and license.
Detroit came to Washington DC begging for a hand out. What they got was a loan offer with stipulations. The deal was not what the top executives wanted to hear, especially since banks, savings and loans and mortgage outfits were benefiting from billions without such stringent stipulations.

Where did it all go wrong with the Big 3 automakers? They could not sell during the see saw. They gauged the market correctly when SUVs were popular, but had no back up plan when gas forced the SUVs into the family garage. Gas prices climbed over $.50 a gallon across the country and that was the death knell for the gas guzzlers. You can't have a prosperous nation when a family's income comes down to 'Do I pay for utilities, mortgage or gas for the car?'

So the Automobile Industry started to see profits dip and, even worse, they were losing money in their reserves. The savings and reserves were paying pensions for retirees and wives of dead retirees. The savings were evaporating from union health care pay outs. The savings were being tapped because a large group of contracted workers were making over $27 an hour, but congruent orders demanded workers to only make 1/3 of that wage.

Kill the UAW? It may just be the right or wrong plan. Unless both sides show some concessions and leniency, their contracts will put the industry into a free fall during this financially woe time. Restructuring has to be worked out. If not, then a lot of pensions and benefits will be unnecessarily lost forever.

The alternative? Dump the car companies. Dump the unions. And retool the whole auto business. Start again with ground floor workers at ground floor wages. They will balk and scream, but they will have jobs, if they care to work at all.

A bail out? They need loans of 7 billion dollars or more? Get it from the Oil Companies. The oil companies profited in double digit billions of dollars during the oil spike in prices. If the auto industry is going to rely on gas powered engines for another 100 years, then this is probably the best place to turn to for free and loaned monies.

The best solution? Retool the industry. They have obviously no idea how to prepare for down times like this correction. The unions will have to start planning concessions or lose everything they have fought for in the past. The car companies will have to welcome new competition from electric and alternative car companies. And the whole industry will have to learn to sell a product that is safe and affordable to own and operate without using a house for collateral as credit.

The future is full of change. And maybe the answers we find in reinventing the auto industry can be a start.

Learn more about this author, Mj Ferruzza.
Click here to send this author comments or questions.