We are a week out from Christmas, two weeks out from the New Year, and the Big 3 American automakers still wait for a crucial lifeline from the federal government. The Democratic-led Congress tried and failed last week to deliver a much needed shot of capital to Detroit. Meanwhile, President Bush says he is still weighing his options, including a "managed bankruptcy."
As options are weighed, the crisis for GM and Chrysler, in particular, deepens: "GM and Chrysler have said they need at least $8 billion by the end of the month to avoid bankruptcy and at least $14 billion to get through the first quarter. Chrysler said Wednesday it would shutter all 30 of its factories for one month and idle 46,000 workers, while GM said it was delaying a key supply plant for the Chevrolet Volt, as both attempted to avoid imminent collapse while the Bush administration pondered its rescue. Chrysler's move signals the first of a cascade of dire actions that will result if the automakers don't receive government aid. Following a 47% decline in sales last month, some Chrysler plants will be closed until February. While the company has a swollen inventory of new vehicles, it records revenues when a vehicle leaves the factory." If either GM or Chrysler fail, Ford is likely to follow shortly thereafter.
As I've stated before, collapse of any of the Big 3 would have catastrophic consequences for the American economy: "A bankruptcy filing by either company would mean production cuts and plant closings, and tens of thousands of workers would be fired, industry analysts say. That would cause many suppliers to collapse, triggering more job losses, straining the cities and states where the car and parts companies operate, as well as federal safety-net programs. It would also deliver another psychological blow to consumers and a major shock to Main Street following the crises on Wall Street."
In such a scenario, how much unemployment insurance would have to be paid? How could states such as Ohio, currently facing a $7 billion deficit over the next years, possibly afford the deluge it would face in the unemployment lines? Ohio Senator Sherrod Brown (D-OH), echoed these sentiments on Sunday's Face the Nation: "We’re already in a deep recession in my state, as we are in most of the 50 states....And this would just plunge us deeper into economic problems, into a hole that it would take a long, long time to extricate ourselves from."
It is time for our elected officials to stop fiddling--Rome is burning.