Going From Motown to Ghost Town

If there were ever a time for an entire region to collectively shout OH $HIT! This is it.

The news is dominated with reports of the collusion between the CEOs of General Motors, Ford and Chrysler, and their hat-in-hand "bruh-man, bruh-man, spare change, spare change" request from Congress. It is a very scary Detroit doomsday scenario that has attracted no shortage of supporters and critics. A few conversations that I've had with friends and relatives in my hometown paint a very real, very human picture of what could happen if a $25 billion bailout of the auto industry does not happen.

Now first off, I'm the last one who would call for private industry to continue to suck on a government tit. Right now our federal deficit is in the trillions and past presidential administrations have allowed the financial industry to run around like unsupervised kindergarteners, only resulting in the Fed loosening and whipping out a boob and squirting $700 billion worth of breast milk into the waiting mouths of the banking business.

But that left only one more boob for another brat: Big Auto, a set of siamese triplets that is just as demanding and hungry as big banking. A decade and a half ago, things were good for this industry, with its SUVs and minivans, which an America that continued to live well above its means screamed for. ...
At the time, everybody in Detroit ate good every night. The plants couldn't hire people fast enough and some people even quit their jobs at which a degree was a prerequisite to go work on the line, which paid better. The 90s made it seem like there was no turning back not just for the city, but for the whole northern I-75 corridor.

But that was then, this is now.

Over the course of the last eight years, plants laying off workers and closing up led to layoffs and closings and nasty strikes at first, second and third tier auto suppliers. Meanwhile Michigan's economy has been anemic, and is now dying like a weed that can't get water.

Divestment, a poor educational system, and a really stupid political scandal that affected not only Detroit, but the entire state did not help matters at all, but that is nothing compared to what will happen if the auto companies do not get help fast.

About 1 in 8 jobs in America is tied somehow to the auto industry. This means every auto plant job creates, in some way, another seven jobs. If any one of these companies dies, the effect will be felt immediately in Detroit as well as in communities along I-96, US-27, I-94 and I-75 stretching from Gary, Indiana to Saginaw, to Toledo, Dayton and Cincinnati, Ohio and even Windsor, Ontario.

Here's the immediate result of no bailout in Detroit, then elsewhere:

*The drying up of operating capital will lead to massive fallout at all three companies. Bankruptcy restructuring is not likely to help because it will require getting more credit that is all but impossible to get at this point in time.

*Auto plants, and immediately, their suppliers will shut down offering no buyouts, no packages. Salaries, wages and benefits will disappear for white collars, blue collars and retirees.
*Individual savings accounts will dry up at banks leaving many both penniless and homeless.
*Workers will not be able to purchase things at retail stores, which will eventually have to lay people off for lack of business.
*More defaulting on mortgages and other bank loans will result in further meltdown of local, then regional financial institutions.
*Inability to pay bills will deplete the tax base of municipal governments, sending whole cities into state receivership.
*Property in and around Detroit, much of which is already selling for half of what it sold for two years ago, will be dilapidated and areas will become blighted, which invites squatting of the new, increasing homeless as well as all types of criminal activity.
*Speaking of which, a black market economy that relies on drugs, prostitution, theft, graft and racketeering will replace a traditional one in communities that were once considered middle class.
*Hospital emergency rooms will become inundated with people seeking care, because they do not have health insurance to go to a doctor regularly. Eventually they will close for lack of funds.
*With no money for infrastructure repair, roads will become virtually impassible, daunting those who do have jobs from getting to work.
*Claims for welfare, AFDC, and food stamps will skyrocket, leaving millions to rely on government aid just to survive.
*No manufacturing in the region will mean the absence of trucking and shipping to other parts of the country. With no goods delivered, firms will have to rely more and more on imports, which will cost more because many must be brought in from other parts of the world, eventually bankrupting businesses who can't pay loans because of the high cost of importing.
*Hence, the suffering will eventually spread to other regions and will serve as a precursor to a lengthy economic downturn from coast to coast lasting at least ten years.
*If it lasts, it will eventually overshadow the Great Depression in its severity.
*Finally, with no banks to lend funds, no manufacturing, nothing to trade and a sickly population, unable to work, the nation could face imminent collapse and with so many mouths to feed, and so few real survival skills, America goes from shining beacon of industry and freedom to third world cesspool.

Believe me, I'm hardly trying to be Chicken Little here, and I sincerely hope none of this comes to pass. But my point here is a thousand square mile swath of land depends on the survival of this industry. If it goes, so may the rest of us. I am also not suggesting that companies get bailed out every time they get in trouble.

However, desperate times call for desperate measures. $25 billion is a drop in the bucket compared to what it will cost to try to save a nation with a faint heartbeat and a comatose economy.

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