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Carmakers swim naked

(China Daily)
Updated: 2009-01-05 08:05

Governments and economies around the world should draw a few lessons from the failing US auto industry, says a Guangzhou Daily story. The following is an excerpt:

Everybody sees who was swimming naked when the tide goes out, according to Warren Buffett. The global economic tide is rapidly receding and the Wall Street financial giants were caught with their shorts down. The US auto industry may be exposed next.

The global economic slowdown seems to have brought American carmakers to their knees, but it is only the third of three major problems plaguing the auto giants there:

Firstly, luxury corporate culture. The head of each the Big Three took a private jet to Washington for the first hearings, a flagrant misuse of money by companies struggling to stay afloat.

Secondly, outdated development strategies. The Big Three kept churning out gas-guzzling cars with powerful engines, even as oil prices rose and environmental concerns began influencing consumer behavior. Japanese automakers such as Toyota and Honda produced energy-efficient vehicle and expanded their market share in the US.

These self-inflicted ailments would have eventually crumbled the Big Three, the economic downtown just speeds the process. But the US auto giants refuse to take responsibility for their ineptitude and are using the economic slowdown to try and guilt the US government into a bailout, saying their demise will not only put out the 4 million auto employees and workers in related industries, but will also send the whole US economy into total collapse.

The Big Three should be allowed to go bankrupt in line with the dictates of the market. But the US government finds itself in a dilemma with consideration of the potential consequence of the fall of such big companies.