Can America Survive Without Detroit?

By GottaLaff

Via Business Week's Ed Wallace:

America thinks it's debating the logic of bailing out Detroit, but what we are actually talking about is the future of American manufacturing. [...]

Let me ask you two questions:

1. Do you believe we should lend Detroit $50 billion to save itself from this economic turmoil?

2. Do you believe that we should lend the American economy $50 billion to save it for you and your children?

Not incidentally, those two questions might actually be the same. [...]

Detroit has it right: If its automakers declare bankruptcy, the likelihood of their emerging as viable businesses is near zero. Their sales will fall faster than they can reorganize. [...]

[A] new contract was drawn up with the United Auto Workers last year that allows new hires in many positions to be paid as little as $14 an hour.

The significance of that was lost on most, but for the first time since World War I we will have people building automobiles in America who won't be able to afford the vehicles they build. Somehow we are led to believe that's real progress. [...]

One of the key reasons the Big Three have so many dealerships is that they have outlets in cities where Nissan (NSANY), Honda (HMC), or Toyota can't claim any type of business. Detroit's trucks may be taking a pounding right now in the press, but let Detroit go away and see what happens to American agribusiness.

That's right: Detroit has a strong presence across the Great American Midwest. In states like Kansas you will find GM dealers in no fewer than 54 counties, while Toyota dealerships can be found in only eight. The reality is that after a few planting seasons, given reasonable crop prices on the commodities market, one day sales of new pickup trucks will again make more money for Detroit than all of the Chevy Volts they may or may not make.

And are you really suggesting that American farmers be given the choice of Tundras or Titans in the future? What a wonderful parting gift for Japan.

One would think the media might be a bit more sympathetic to this crisis, given how many of that industry's jobs hinge on the outcome. After all, there are years when total automotive advertising can reach upwards of $15 billion annually. But not this year; and already we are seeing jobs melting away in the media—from radio stations to TV and with print publications—because of this automotive downturn. Let Detroit go away, and you're talking about a decade-long drought for the Fourth Estate.

Not to mention the impact it would have on professional sports. GM has already pulled sponsorships at some Nascar tracks and dropped the Super Bowl. [...]

Additionally, if Detroit fails, [...] we will lose the income tax revenue from their workers, not to mention the tax revenue from their suppliers' workers, and so on down the line as they all become unemployed. And they won't have much if anything besides food stamps to spend, so there goes all that sales tax and interest income, too. [...]

We were led here by 28 years of new government rules moving us toward "anything goes" capitalism—and that brand should never have been confused with American capitalism, in which laws protect buyer and seller and whose dealings are characterized by integrity, honesty, and sanity. [...]

Americans love underdogs but hate losers. Bankruptcy would move Detroit into the latter column, and America wouldn't be far behind.

Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism, given by the Anderson School of Business at University of California at Los Angeles, and is a member of the American Historical Society.

H/t: Eve