Washington - 02 April 2009 - Earlier this week the Obama administration, now the effective owner of the U.S. automobile industry, put Detroit on notice that it has 30-60 days to come up with a believable plan to "restructure" itself or it goes into bankruptcy.
This action makes it a good time to step back and ponder just where America's industrial base is going. With $2 gasoline and some incentives, recession-wracked American consumers seem willing and able to absorb another 8 or 9 million new gasoline and diesel powered cars and trucks this year --- but does this make any sense? The "restructuring" plan seems to be one of trimming overhead, shutting some factories, abrogating labor agreements, and stiffing shareholders, bondholders and debtors to the point where the manufacturers might be able to limp along with a minimal infusion of taxpayer dollars.
This plan might be fine except for one glaring fallacy. In the next few years, oil prices are going up so high that ownership and use of the automobiles and trucks in their present form will be a totally uneconomic proposition. How many of the current flavor of cars and trucks is Detroit going to sell with gasoline at $10 a gallon or higher? More >>>
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