Bailout Floors the Pedal on Downsizing

Workers leave the Daimler Chrysler North Assembly Jeep plant in Toledo, Ohio, after President Bush approved $17.4 billion in emergency loans to beleaguered automakers. (By Madalyn Ruggiero -- Associated Press)

Chrysler was finding its way, improving manufacturing efficiencies. But Chrysler's problem -- not shared by GM and Ford -- was products, namely, not enough small, snazzy cars. Unlike GM and Ford, Chrysler has a negligible overseas operation, which means that it does not have the same kind of thick product portfolio held by its U.S. rivals.

Today's GM and Ford are not yesterday's corporate horrors. Both are committed to improving product quality and fuel efficiency. Both have a good chance to survive and thrive. Both are positioned to take advantage of the shift in retail focus from a mature North American market to potentially exploitable markets in Asia, Eastern Europe and South America. Those regions are coming under pressure to open up to U.S. exports and to countenance the presence of U.S.-owned manufacturing facilities, just as the United States has long been open to them.

It thus makes sense for the United States to prop up its automobile industry as much as possible, at least until a better consumer credit environment revives sales here and abroad. That way, the multibillion dollar bridge loan approved for the industry yesterday likely will lead to more jobs.

But it won't necessarily lead to better pay.

The UAW's failure to organize foreign rivals in America has undermined the value of the union's employment agreements with Detroit. As long as workers at nonunion companies receive lower pay than their counterparts at UAW-represented rivals, the union will be under pressure to make concessions at the bargaining table.

The federal bailout loan agreement greatly increases that pressure. The money will help the companies, which long ago began an aggressive restructuring of their operations. But its terms of agreement mean that the UAW will have to live with less, which means that nonunion workers will be asked to live with the same thing.

In that way, the automotive bailout loan is a lot like that money that helped the banks, but left many homeowners struggling under the weight of mortgages they cannot afford.