KoreaToday So, Where Is the Exit?

The Question Resonates With No Clear Answers

By Kim Hyun-cheol

Staff Reporter

The global car industry is at a crossroads. The ``Big Three'' in Detroit, Michigan, are a basket case that may go under unless they receive an immediate bailout package. European automakers are in better shape than their U.S. competitors but are still calling for subsidies. Korean carmakers are also reducing work hours in order to cope with an inevitable drop in demand both domestically and from overseas.

General Motors (GM) said last week its board of directors doesn't consider bankruptcy protection a viable option to settle the company's financial troubles, but admitted having discussed Chapter 11 as a possible legal duty.

GM, which has cut jobs and closed plants over the past several years, says it will run out of cash by the end of the year, unless it gets cash injections from the federal government.

CEOs of GM, Ford and Chrysler made a collective trip to Congress for the bailout loans, but came back empty-handed after getting rebuffed by lawmakers, who were upset by the fact the trio flew there in separate private jets to ask for the aid. Lawmakers also slammed the CEOs for showing up without a concrete plan to reduce high labor costs, one of the main reasons they are behind their foreign rivals.

In an open letter to the auto executives released Friday afternoon, U.S. House of Representatives Speaker Nancy Pelosi and Senate majority leader Harry Reid requested that, by Dec. 2, they provide details of the companies' financial conditions and short-term cash needs on top of their plans to achieve long-term viability.

The Democrats also asked the automakers to show how they will make sure the government would be reimbursed and share in future profits, eliminate dividends and lavish executive pay packages, meet fuel-efficiency standards, and address their health care and pension obligations if they get federal help.

Lobbying by the automakers partially worked, as U.S. President-elect Barack Obama pledged Monday to aid them in avoiding a cash shortage and possible bankruptcies, saying, ``We can't allow the auto industry simply to vanish.''

Still, he made the same request as lawmakers did, calling on the Big Three to present a plan on how they will overhaul their operations to become more competitive.

``We should help the auto industry, but what we should expect is that any additional money that we put into the auto industry, any help that we provide is designed to assure a long-term sustainable auto industry and not just kicking the can down the road,'' Obama said.

Global Crisis

In normal circumstances, this trouble might have given their overseas rivals an edge, however, even Japanese carmakers are not exempt from the global crisis.

Japanese firms are also suffering a management crisis, predicting an overall fall this year in sales and revenue, for the first time in nine years.

Toyota, the world's largest manufacturer, is planning to cut some 3,000 jobs, nearly half of its non-regular workers, by March next year. Matsuda, which earlier announced a plan to reduce its production by 73,000 vehicles next year, also said it will let go of over 70 percent of its temporary employees by the end of the year.

Nissan expanded an initial output curtail plan of 72,000 vehicles over three months starting December to 147,000, surpassing 10 percent of its domestic production for this fiscal year.

The financial cold snap has gripped European makers as well. Sales last year were down 15 percent throughout the continent, and the numbers are likely to worsen in 2009. Most makers are planning to shut down their assembly lines temporarily, with some already laying off workers.