IF GENERAL Motors were to declare bankruptcy in the coming months, as now seems inevitable without government aid, it would lead to an economic tsunami that would create near-depression conditions for Michigan and Ohio, vastly deepen the national recession, and make our country weaker and more vulnerable in many spheres, including military ones. (In wartime, would we want to depend on Toyota to make our tanks?)
For all those reasons, President Bush should take the lead of President-elect Barack Obama and speed immediate emergency legislation that will enable General Motors, and Ford and Chrysler as well, to survive, at least until a coherent strategy can be agreed upon for our nation's automotive future.
Waiting till the new administration takes over on Jan. 20 would be too late, according to experts. Rod Lache of Deutsche Bank, one of the industry's most respected analysts, says that without assistance soon GM may not be able to pay the supplier bills that will come due in January. If that's the case, GM will have no choice but to declare bankruptcy.
Other corporations have been able to reorganize under Chapter 11, but for an automaker, bankruptcy would spell certain extinction, since consumers, unsure of whether their warranties would be valid, would immediately stop buying their vehicles.
The American auto industry has doubtless made many mistakes in the past, but in recent years has done an admirable job getting its act together. General Motors' current cash flow woes come as a result of no fault of its own. America's once-proud corporation is a victim of the Wall Street panic and the crippling credit crunch, which means consumers cannot get loans to buy vehicles.
While there are no guarantees that an aid package will work miracles, many experts believe that a bailout now would be cheaper than cleaning up a greater mess later.
It is ironic that the Bush Administration quickly leapt through hoops to bail out the financial services sector, but is balking at spending a fraction of that to save one of the most important centers of manufacturing in this nation. Great nations cannot have economies based only on pushing paper; manufacturing always has been at the heart of who we are.
Sean McAlinden, the highly respected chief economist with the Center for Automotive Research, calculates that failure of the Big Three would mean 3 million lost jobs within a year. He suggests that as a compromise, the government should extend a $15 billion bridge loan to GM to enable it to survive until February, by which time the Obama economic team will be in place. That makes some sense. President-elect Obama knows the auto industry has to be saved, and the voters just gave him and his policies a far more decisive mandate than they ever gave George W. Bush.
Aid to GM, Chrysler, and Ford should have strings attached, notably a mandate that the firms go full-tilt toward producing fuel-efficient vehicles. Gas prices may be down at the pump today, but the age of the sport utility vehicle has passed.
Supposedly, President Bush has indicated that he might hold industry aid hostage to the willingness of congressional Democrats to approve free trade with Colombia. If so, the kindest thing that can be said is that his priorities are appalling.
Mr. Bush should realize, in the waning weeks of his administration, that he doesn't need the destruction of a major portion of the American economy added to his legacy. He needs to work with Congress to save the auto industry - now.