Now for the hard part

12/20/2008

THERE were sighs of relief at Chrysler and General Motors yesterday as the news that President Bush had decided to extend up to $17.4 billion in loans to the stricken automakers.

That was appropriate; as Mr. Bush noted, a collapse of those two companies would have seriously worsened the nation's economic crisis. But if anyone thinks this solves the industry's problems, they are sadly mistaken. The hard part actually begins now.

GM and Chrysler face perhaps the roughest three months in their history as they struggle to come up with a successful plan to make themselves viable and competitive - without further taxpayer subsidy. If they fail to do that, the government says it will call in the loans and pull the plug.

Persuading Congress and the incoming Obama administration that they are on the right road won't be easy; though the credit crunch brought Chrysler and GM to their knees and crippled Ford, this merely accelerated a problem that has been building for a long time. They've been losing billions for years. Their business model is broken; they have negotiated unrealistic contracts, and have been losing market share since the 1960s.

It is true that a small band of demagogic Southern senators irresponsibly prevented Congress from even voting on Detroit's aid. But there is no denying that many of their criticisms were accurate. And unless the auto companies - and their unions - get serious about restructuring and reinventing themselves, they will still be doomed.

GM needs to realize that fooling around with a few nameplates and slowly reducing Pontiac won't do the job. The unions need to know that merely suspending the infamous "jobs bank" won't do it either.

Sen. Richard Shelby of Alabama, the man Detroit loves to hate, maintains that what Mr. Bush did only serves to "delay the inevitable." Detroit is going to have to work hard to prove him wrong.

The hard truth is that in a best-case scenario, a lot of the 240,000 people working for the Big Three today won't be there a year from now. Chrysler has to find itself a merger partner, and soon. The company said it needs $7 billion in immediate loans to survive; the President gave it only $4 billion, money it might do well to use as a dowry if a marriage with a more viable company seems possible.

And let's be clear: Though it took him too long to make up his mind, George W. Bush deserves credit. For the first time since his magnificent speech to Congress in the aftermath of the Sept. 11 attacks, he sounded like a statesman. Mr. Bush's decision to grant these short-term loans went against his own political and ideological beliefs. But he recognized that the welfare of the nation means that a president may have to do things he may find personally unpleasant.

Now it is Detroit's turn. Perhaps a far greater statesman put it best. Years ago, when America and Great Britain won a small victory early in World War II, Winston Churchill said, "This is not the end. This is not even the beginning of the end. But it is, perhaps, the end of the beginning."

Chrysler, General Motors, and the UAW have until March 31 to prove they have what it takes to live to fight another day.