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Editorial

Tough times, tough decisions

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On Monday, General Motors and Chrysler were given 60 and 30 days respectively to restructure, or face some form of bankruptcy.

Once one of the largest companies in the world, GM has lost $82 billion since 2004. It has been in a series of restructuring modes for a couple of decades now, and last month announced another restructuring plan.

But Monday, finally, GM was told its restructuring plan wasn't good enough. The Obama administration's "detailed findings" concluded that: "Based on extensive analysis and the advice of a range of financial and industry advisors, the Administration has determined that GM has not presented a viable plan that would succeed, even in an improved economic environment."

Of Chrysler: "After extensive consultation, the Administration has determined that Chrysler has not demonstrated that it can achieve long-term viability as a stand-alone company."

So Chrysler, which last fall was considering a merger with GM, has 30 days to merge with Fiat or... disappear, presumably.

These are tough times, and with them come tough decisions. Many, many tough decisions, as numerous companies, governments and households have already found. Compromise decisions are out. Black and white choices are in.

Interestingly, some commentators have suggested that the Obama administration is compromising with the automakers; that the "controlled bankruptcy" Obama said faces Chrysler and GM if they don't restructure to his satisfaction would put the U.S. government in the car business, just as it has found its way into the banking business and the insurance business.

Regardless of one's interpretation, the size of the auto industry reinforces the magnitude of the choices being made. As of last September, GM employed about 250,000 people around the world, half of them in North America. That figure doesn't include dealers, parts manufacturers and other suppliers, and the people who service GM products. GM also owns stakes in nearly a dozen other auto-related companies.

The latest restructuring plan, now rejected, would have seen GM cut at least 10,000 salaried positions in North America, and those who remained employed would have faced salary cuts of 10 per cent.

Meanwhile, Chrysler's 10,000 Canadian workers were already feeling threatened by President Tom La Sorda's remarks last month that Chrysler could shut down all of its Canadian operations.

The only economic situation more desperate than the two car manufacturers' is that of their hometown, Detroit. The average house price in the City of Detroit last year was $18,128, less than the average price of a new car ($22,650). But that was last year. In January, the average sales price of a home in Detroit was $13,638. Once a city of almost 2 million, it's now home to 800,000.

Meanwhile on the West Coast, in a little town far removed from the industrial grime of Detroit and Windsor and Oshawa, we're worried about where the medals for the 2010 Olympics will be presented. We don't bat an eye when the budget for extending the Valley Trail from Spring Creek to Cheakamus Crossing comes in at $815,000. (That's without lighting, which presumably will be added.) And "The Whistler factor," the 20 per cent extra that it costs to build something or make something happen in Whistler, remains alive, even in tough times.

In the back of many people's minds there is this idea that this economic storm will pass, eventually, and then things will get back to the way they were. Indeed, many are now planning for the day after it all ends.

And in Whistler, we seem to have built into our collective suvsonscious the idea that the recovery will begin right after the Olympics are over, in about 12 months time.

But the economy is so severely damaged in so many areas it's not just a matter of recovery but of wholesale restructuring. The auto industry is this week's story. Prior to that it was the financial sector. The forest industry is looking for new markets. Workers in the Alberta oil patch are facing cutbacks. Media companies are in trouble because they're over-leveraged and because the industry is going through fundamental changes. Airlines, like automakers, seem to have been restructuring for years.

All of these people in these industries and businesses are facing tough decisions, hard choices. One of their easier choices will be spending money on vacations in mountain towns.

 

 

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