Auto Giants to Become Dwarfs?

Today’s lead article in The New York Times is titled, “President Gigves U.S. Automakers a Short Lifeline.” The large headlines and two-column article continue to describe President Obama’s decisions on General Motors and Chrysler.

In addition to the ultimatums to receive additional federal aid — GM has 60 days for restructuring and Chrysler has 30 days to merge with Fiat — the article also describes the nature of the changes demanded, changes “experts say will severely shrink them.”

So, reading between the lines, it seems the auto “giants” will no longer dominate the American manufacturing sector as they once did, even after being nursed back to financial health, and even when the recession is over. People look at this as a decline for American industry, but I prefer to see it as a transformation.

We are no longer in a manufacturing age but an information age. People who get hung up about “making things” as a way to prosperity miss this essential fact. Our economy is largely service related, and the productivity engendered by computers, and our ability to create new “killer” apps, will continue to keep this country in the forefront of change and progress.

It’s unfortunate about the car companies, and unfair about the sacrifices demanded from them compared to financial institutions (a topic for a whole new entry), but this may represent the beginning of the end of an age. As such, it will create enormous dislocation and suffering, and we can only hope the transition is as smooth as possible under the circumstances.