Yet Detroit cannot be blamed for feeding America's fuel gluttony, anymore than McDonald's or Burger King can be held totally accountable for Americans' insatiable appetite for ever larger portions of unhealthy food. An American truism is that "bigger is better", whether it be cars, meals, homes, television screens, or the size of the local supermarket.
Nor can the United Auto Workers be held entirely to blame for the automakers' current financial straits. While it's true that union employee health benefits add an estimated $1,700 to the cost of each vehicle manufactured by the "Big Three", that's a cost imposed by our society's refusal to provide government funded, universal health care, a benefit enjoyed by workers in most other industrialized countries. Relieved of the cost of health care benefits, Detroits' automakers would earn roughly $900 per vehicle manufactured, as opposed to its current per vehicle loss of $800.
Former U.S. Senator and Secretary of Energy Spencer Abraham makes a good case for saving Detroit in a column in today's New York Times:
For Detroit, Chapter 11 Would Be The Final Chapter
MANY commentators and members of Congress have declared that the best hope for the Big Three auto companies is to declare bankruptcy. Airlines have gone through bankruptcy and adjusted, after all, so why can’t carmakers?
This comparison is appealing, but flawed. Almost every carmaker that has ever gone bankrupt has disappeared for good. And there is no reason to believe the Big Three would not do the same. Chapter 11 filing would almost surely lead to liquidation.
Just as financial institutions depend on the confidence of those with whom they do business (as Bear Stearns and Lehman Brothers discovered), automakers depend on the confidence of car buyers. To purchase a car is to make a multiyear commitment: the buyer must have confidence that the manufacturer will survive to provide parts and service under warranty. With a declaration of bankruptcy, that confidence evaporates. Eighty percent of consumers would not even consider buying a car or truck from a bankrupt manufacturer, one recent survey indicates. So once a bankruptcy proceeding got started, the company’s revenue would plummet, leading it to hemorrhage cash to cover its high fixed costs. ...continue reading
Detroit makes its own case in the following video:
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