US car sales are way down, Ford at 40% is faring better than GM at 49% and Chrysler at 55%. All in all, US consumers bought 657 thousand light vehicles in January of 2009. That is roughly one vehicle per 160 households. If the trend holds up, one in twelve households in the US will buy a new car this year. That is still an astoundingly large number and an enormous carbon footprint. But let's focus on the economy now.
All of it casts a dark cloud over the economy and the newly announced bail-out package. It seems clear that GM and Chrysler are in deep trouble. So deep in fact that many have questioned whether it makes sense to keep these company's afloat. Chrysler seems all but doomed.
The company said it may only sell 1 million vehicles this year, but it has capacity to produce 2.2 million in its 11 North American assembly plants. Maybe that sounds awful, but Chrysler only sold 62 thousand vehicles in January. Last September it sold slightly over 100 thousand. It's been all downhill from there, so it appears one million maybe too optimistic. It could be closer to 750 thousand. To make matters even worse, the company has 360 thousand vehicles piled up. Just selling those would take 151 days or almost half a year. New production? Sounds more like half a million max to me.
If you don't see huge layoffs and much pain in the coming months you need to have your eyes checked out pronto. The average plant has 3,300 workers. It appears at least half will have to go, no matter what. Such a reduction would ripple through related industries causing huge additional "collateral" damage.
Not all assembly plants are in the US of course, and Chrysler has plants in Canada and Mexico as well. Canada may well offer some assistance, and the company has already received funds there, but don't count on Mexico, except to absorb losses. The wonders of capitalism.
It is unclear what should be done to avert disaster. Saving the auto makers is like dumping water in a bottomless pit. Best would be to let them go under. However, given the debt Democrats owe to unions and workers, it appears this is not politically feasible. Even George W. did not want the automakers to fail on his watch.
Not that the Republicans are any better at providing solutions. The universal Republican remedy of tax cuts will be no more effective in this matter than school prayer. Or wishful thinking.
Surely we will need a job creation program of huge magnitude. A program that can put tens of thousands of workers to good use. Creating such a program is not trivial, even if funding exists. Maybe it is time to look into high speed rail? Wasting the money on more highways seems like the dumbest thing to do. When it comes to infrastructure, we should focus on sustainability, not more waste. How does that sound to you?
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