"I got me a Chrysler and it's as big as a whale" The
B-52's.
"We have met the enemy, and they is us"
Pogo
All of the competitors of the big 3 (largish 2.8?) are headquartered in countries where gas is much more heavily taxed, consequently their core product is an effective automobile.
Here we've attempted to do something different, leaving gas taxes low and regulating fuel economy via CAFE. Thus we found our domestic industry producing 6000 pound V8 Buicks, Chryslers and Fords in the 60's and 70's. The advent of safety standards included a loophole that brought us 6000 pound V8 trucks (and derivatives at an incredible markup) and essentially underdesigning most of our automobiles to be able to give them away (sell below cost) to keep the CAFE numbers up.
And we as Americans couldn't buy them fast enough. Even Toyota, Nissan, and Honda started to scoot that way. Even VW and BMW and Mercedes... against all logic, such was the power of the US market that these could be made in numbers enough to be profitable to be sold all over.
This worked Long term this is not a sustainable business model, especially when there is a risk of instability in energy prices - and as long as we're importing significant amounts of it,
there is risk.
So what's going to happen? The careful observer will note I did not ask "what's the solution?" as there may not be much of one.
This is my prediction, and worth double what you're paying for it, or half, it's all the same.
1) the new administration will arrange bridge financing for 2 of the three corporations. The third won't accept - or won't be willing to accept the strings that come with this.
2) the impact of the government loans will be very similar to filing chap 11, but won't be called that due to the baggage that phrase contains. In a nutshell, shareholder equity will be diluted (essentially to zero in GM's case according to Deutsche Bank:
"While we believe that that GM's secured creditors may get a par recovery, unsecured creditors may get very low recovery. Equity shareholders are unlikely to get anything. We are lowering our target on GM equity to $0."
3) gas taxes will rise. This will be for many reasons.
i) to cover the risk and provide financing for the bridge loans for automakers
ii) to create demand for the product that F and GM are in the middle of shifting towards (Fiesta, Focus, Cruze, and Volt)
iii) to provide stabilty against future energy price instabilities
iv) to fund infrastructure improvements (jobs)
4) something significant will happen with/to the UAW. This will be one to watch. The problem isn't so much with unionized labor, I think, after all Germany and France have that and don't find themselves in this pickle. The difficulty (I hesitate to label it a problem) is more in a 1940's era "Us vs the corporations" mindset. The problem it isn't the UAW vs GM, it's both of them vs. Honda, Toyota, Mazda, Subaru, BMW, Mercedes, VW, and other manufacturers who also build cars & trucks in the United States.
5) One of the 3 goes away. If the market goes from 15-16million a year to 12 million, the economy of scale isn't going to be there for that many US manufacturers. It's like AMC all over again. The jobs won't entirely disappear, however, the incomplete list in #4 will pick up some of the slack (Honda's first car from it's new plant - officially opened last week - sold 30 hours after coming off the line).
6) National health care. Not arguing the merits or anything like that. My suspicion is that this will be part of a multi industry "stimulus." It will be marketed, I think, as a means of making American companies more competitive world wide. Offshore manufacturers have already mentioned WTO action if the US gov't gives too much to the Big 3. This would be a way around that, possibly mollifying the unions for the losses they're sure to take. The thing to watch, I think, is whether H. Clinton takes a cabinet post or stays in the senate. If she stays a senator, I'd look for this sooner rather than later.
I may be totally full of hooey, but this what I think is coming. Some of it I don't like. Of none of it do I have any inside knowledge (Disclosure: I did some work for GM back in 1995. I do not discuss business with those former colleagues).