After 84 years, Chrysler, once one of America’s largest corporations, an automaker with a long history of innovation and iconic brands and models, filed for bankruptcy yesterday. Like a zombie, Chrysler will seem to live on for a while, propped up by the federal government and Fiat. But it’s a dead company walking.
I give the Obama administration credit for trying to salvage it for the benefit of the employees, but both the Bush and Obama administrations, and many administrations before them, are culpable for its demise in that they’ve done nothing to fix the broken trade policy that grants free access to the American auto market to any foreign maker who wants it, while getting nothing in return.
But Chrysler is unlikely to survive for long. Regardless of whether or not, with Fiat’s help, they start marketing small, fuel-efficient cars, few will buy them. Chrysler has two strikes against it: a lot of Americans won’t buy American-made vehicles because it’s not consistent with the “hip” image they want to project. And now they have a “bankrupt/loser” image to go with it.
Their plants are already shut down as suppliers, many on the verge of bankruptcy themselves, are refusing to provide parts with no hope of being paid. Dealerships are putting on a brave face, but know that many will be closing their doors as well. Bond-holders are mounting a legal challenge to government’s quick, “pre-packaged” bankruptcy plan, threatening to drag it out for months.
The net impact of all of this will be that the American auto market will be diluted even further with the entry of yet another foreign auto-maker – Fiat. Market share for all auto makers, foreign and domestic, will decline slightly. Has Italy promised Chrysler, or GM or Ford for that matter, a corresponding number of sales in Italy? Of course not. Because of their extreme population density and over-crowding (Italy is six times as densely populated as the U.S.), many Italians don’t even own cars. Italy is one of the parasitic economies of the world dependent on exports to the U.S. to keep their labor force employed.
What’s happening to the domestic auto industry and the U.S. economy as a whole is no different than what happens to any host organism that becomes infested with parasites – a slow, agonizing death as it bravely soldiers on but becomes more sickly with each passing day. As overpopulated nations feed on our market, slowly draining us of jobs and wealth and giving nothing back in return, we try to pretend that nothing is wrong, even as our economy has been brought to its knees. And, just as in the case of a parasitic infestation, where the parasites begin to feed even more ravenously as the host is dying, oblivious to the fact that the host’s death portends their own fate as well, foreign manufacturers like Fiat are swarming to the American market. Soon will come a flood of auto-makers from China. All will be chanting the benefits of free trade and snarling at the host in defiance of any moves to swat away the invading horde with moves toward protectionism.
It’s time to start taking swats. Just as a horse is blessed with a tail to keep the hordes of flies at bay, we have at our disposal a whole array of trade policy tools to maintain balance. Yet, inexplicably, we’ve settled on a policy at the extreme end of the spectrum, giving free access to our markets to everyone while demanding nothing in return, and disavowing other policies that offer some hope of restoring balance.
We’d better awaken from this zombie-like trance soon, or the same fate that has befallen Chrysler awaits our entire economy.