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Big Three on last legs. Image by GM.

Big Three on last legs
After a glimmer of hope, America's entire car industry is on its knees again as the $14bn bailout plan collapses.
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If the naysayers are to be believed, the entire car industry is a teetering domino set at the moment. And there, proudly standing at the start of the line-up, are three fat dominoes marked 'Ford', 'GM', and 'Chrysler'.

So when the US Senate voted against doling out 14bn tax dollars yesterday, what it was actually doing was nonchalantly flicking the first domino over. It's only a matter of time before we watch the rest fall.

Or so it seems. With every passing day - even hour, lately - there's a new reason to believe the American car industry is dead and buried and that it'll take the rest of the world's makers with it (Apart from Ferrari, of course). The moment the Nikkei 225 opened (Tokyo's stock index) following the news, ten percent of Nissan, Toyota and Honda's share prices was instantly wiped out.

So what happened? Well, yesterday the US Senate vetoed the $14bn bailout proposal for the Big Three, which was only a day earlier being reported as a given because it had been passed by the House of Representatives. The apparent volte-face came because under the USA's two-tiered governmental system, proposals agreed by the House of Representatives must then be voted on by the Senate - the higher tier of US Congress, and the one that ultimately ratifies proposals like the bailout.

A majority 52 members of the Senate voted to proceed with the bailout, versus 35 who voted against. But it wasn't enough - 60 are needed to see it ratified. So, now there's no Government money for the Big Three. Yet, anyway.

In the immediate aftermath, a visibly shaken Senator Harry Reid, a proponent of the bailout and leader of the majority, appealed to President Bush to make some of the $700bn TARP fund available to prevent catastrophic job losses. (That's the Troubled Assets Relief Programme, which US Congress set aside to buy shaky assets from beleaguered companies in the wake of the global credit crunch.)

Rumour has it that even at the last minute panicked legislators at the House of Representatives were trying to squeeze the bailout plan into a Senate-shaped package in order to muster the 60 votes needed. There was a fundamental problem, though, which lay with the US Auto Workers Union: it refused to accept the Democratic Party's insistence that the Big Three's workers move instantly to pay parity with employees at foreign-owned US car plants. It would mean a slight pay cut for 250,000 members, and that wasn't happening. What's that saying about cutting off your nose to spite your face?

And the word on the street is that both GM and Chrysler are literally days away from filing for bankruptcy, with prominent industrial analysts predicting it's only a matter of time for one of them. Thus, the fact that there will be no further bailout discussion until January means we could easily be talking about the Big Two before we've even finished our Boxing Day turkey curries. Some reports say Chrysler wouldn't even have made it with the bailout cash.

The only thing certain right now is that by this time next year the entire motoring landscape will be very different. It'll probably be slightly greener, and there'll probably be fewer American car models on offer too - but quite who'll be left to make them by then is anyone's guess.

Mark Nichol - 12 Dec 2008

2008 General Motors at Detroit Show. Image by GM.2008 General Motors at Detroit Show. Image by GM.2008 General Motors at Detroit Show. Image by GM.2008 General Motors at Detroit Show. Image by GM.2008 General Motors at Detroit Show. Image by GM.

2008 General Motors at Detroit Show. Image by GM.2008 General Motors at Detroit Show. Image by GM.2008 General Motors at Detroit Show. Image by GM.    

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