Automakers' Last Chance

Tuesday, April 7th, 2009

April 1, 2009 Ed Cartoon

Playtime is over for North America’s largest automakers.

United States President Barack Obama wielded a heavy hand Monday, defiantly rejecting the recent restructuring plans presented by both General Motors and Chrysler and setting firm deadlines for the two companies â€" 60 and 30 days respectively â€" to shape up their operations.

Canadian federal industry minister Tony Clement â€" his hand all but forced by the actions south of the border â€" followed suit, rejecting reorganization plans levied by GM and Chrysler’s Canadian branches, while loaning them $3 billion and $1 billion, respectively, in order to stay on their feet.

GM alone employs 12,000 Canadian workers, most of whom are unqualified for jobs outside the manufacturing sector. There are also thousands more jobs in auto parts and other industries tied to the auto industry. Certainly, the collapse of Canada’s auto industry would result in a crippling unemployment crisis.

However, the government must now reach a point when the self-destructive tendencies of the industry are no longer tolerated and financial handouts not as easily distributed.

The blame for this crisis must rest squarely on the shoulders of the auto giants who have been blind to a changing consumer climate and should have restructured their strategies long ago.

As environmentalism caught on both GM and Chrysler failed to recognize the consumer trends and invest in green vehicles.

Additionally, as fuel prices were steadily on the rise, so too was the production of gas-guzzling trucks and sport utility vehicles.

If Chrysler’s Canadian chapter was not loaned $1 billion on Monday, they would not have been able to continue paying the lucrative pensions and high wages which their workers demanded in labour negotiations.

Both Chrysler and GM asked the Canadian Auto Workers union to come back to the table in order to reduce labour costs, however their requests were quickly spurned. The union needs to be a partner in saving the industry and realize now is not the time to be inflexible. Reduced wages are preferable to unemployment.

President Obama and Minister Clement were correct to reject both GM and Chrysler’s plans and set deadlines for the two mismanaged companies to get back on track.

Furthermore, the loans provided to both Canadian chapters this week must be the last unless a clear and effective plan that capitalizes on green energy and provides jobs for Canadians is presented.

The billions of dollars Canadian governments are preparing to hand over might be better spent to stimulate the economy in other ways. Eventually Canada needs to cut its loses with regards to the auto industry instead of blindly throwing away more money.

It is time for Canadian governments to say this is the automakers last chance.

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