Ford Motor Company announced plans last week to mortgage nearly all of its domestic assets to raise $18 billion for its restructuring plan. The move was yet another signal that the era of the mighty Big Three auto companies in Detroit is coming to an end.
Whatever the root causes of the problem – more efficient foreign competitors, unpopular product lines or misguided vehicle development strategy, to name a few – Michiganders must realize automotive manufacturing will never again form the core of a healthy state economy.
Ford is taking a tremendous financial risk – if the company does not spend its infusion of cash wisely, it could file for bankruptcy in the next few years. More likely, financially attractive portions of Ford would be sold to the highest bidder, causing another wave of panic across Michigan.
As part of its restructuring, Ford has offered buyout deals to all 75,000 of its union workers to reduce its future financial obligations. Nearly 35,000 Ford workers have accepted the proposals, and many seem destined to join the growing group of residents leaving the state. Unfortunately for Ford, the likely increase in sales of moving vans won’t generate enough revenue to save the company.
But regardless of whether Ford’s gamble pays off, Michigan needs to prepare immediately for life without a booming automotive industry. Accordingly, the state needs to shift any available resources into promoting a knowledge-based economy, in part by increasing funding to higher education. The state should also focus attention on training laid-off workers through tuition assistance and other programs so they can learn the skills necessary for the 21st-century job market.
The best hope for the American auto industry is for a knowledge-based economy to develop new transportation technologies exclusive to American manufacturers. Foreign automakers currently have the market cornered on fuel-efficient hybrid vehicles, but they could easily lose their market share if vehicles with even greater fuel efficiency were developed.
Ford has three years and $18 billion to find an alternative to the internal combustion engine – or at least build a line of cars Americans want to buy. In the meantime, the state would do well to get over its decades-long romance with the automotive industry and focus on developing a skilled workforce.