Why Big 3 can't follow steel's path

[Bravo Zulu]

Bankruptcy won't help auto industry the way it helped steel
Sunday, November 30, 2008
By Len Boselovic, Pittsburgh Post-Gazette

Earlier this decade, when it was battered by cheap imports and burdened with pension and health care obligations, America's hemorrhaging steel industry ensured its survival by swallowing the bitter pill of bankruptcy.
Throwing themselves at the mercy of judges who kept creditors at bay, Bethlehem Steel and other Rust Belt icons shed $8 billion in pension obligations and instantly made themselves more attractive targets for acquirers. The buyers negotiated court-approved wage, benefit and other concessions from labor unions, closed outdated mills, and consolidated a fragmented industry.
The result: a leaner, globally competitive steel producers with cleaned up balance sheets and flexible cost structures that provide some shelter from cyclical downdrafts.

Could the same prescription cure Detroit's Big 3?
Analysts believe the discipline and focus bankruptcy exerted on debilitated steelmakers would be good for the Big 3, given their public relations gaffe of taking corporate jets to Washington to plead for a $25 billion loan.
But analysts said there are a host of reasons why the court-supervised regimen won't work for the Big 3. The auto industry faces more severe problems and a much grimmer economic outlook and may not find rescuers who can arrange financing in gridlocked credit markets. Moreover, customers likely will think twice about buying from a bankrupt car maker that may not be able to provide warranty coverage, fix their recalled vehicles or offer parts and service.

http://www.post-gazette.com/pg/08335/931740-185.stm

[madrchsod]

1. there`s a few steel mills that are owned by american firms

our core industry in this country is owned by foreign nationals....from supplying the steel to build this country,fight two world wars, and rebuilding europe and japan after ww2,to being owned by foreign nationals.

this is not america i knew when i grew up.

[Warren Stupidity]

2. Bethlehem Steel ceased to exist.

It was liquidated. Some, and only some, of its production capacity eventually became part of Arcelor Mittal. Meanwhile the US is now a distant 4th in global steel production, accounting for less than half of what the EU produces and less than 24% of what China produces. Go visit Pittsburgh - it used to be the steel production center of the world. A bankruptcy and liquidation of the Detroit manufacturers would be the end of significant production in the US. Great jobs with great benefits - and the upward pressure they put on all manufacturers to provide equivalent compensation - would vanish overnight. The non-union foreign manufacturers with plants in this country would no longer be obliged to compete with UAW contracts in order to keep the unions out, there would be no UAW. The downward spiral of labor compensation in the US would accelerate.

Trillions for Wall Street, nothing for working america.

[Igel]

3. Severstal has Sparrows Point.

They bought it from Arcelor Mittal.

Both of my parents worked at Sparrows Point/Beth Steel their entire lives and retired from there, as did the parents of most of the kids I knew in high school.

The expectation of decent paying low-skilled jobs nearly killed off nearby communities. None of my peers in high school even thought about college, really; just get your HS diploma and work for uncle Bethlehem. It worked for their grandfathers, it worked for their fathers, it worked for their brothers, it would work for them. But it was '77, and things were unravelling in the much vaunted "post-industrial" economy that was all the political rage in DC. Suddenly there was no uncle Bethlehem, and the HS diploma got you nowhere by itself. No jobs to be had locally, almost everybody moved; the retirees that were left held out for a while to see their properties appreciate, then they moved.

I drove through the old neighborhood in '99, I guess it was. I knew nobody; I recognized no businesses. The elementary school had been torn down and replaced; the high school was still there, but was an environmental magnet school and most graduates went to college. It felt completely different, a white-collar bedroom community.