Bad News For Bike Manufacturers

I am reading frequently that the closing of GM (executives claim, dubiously, that bankruptcy is not an option, that it's bailout or die) will cause complete devastation to the entire auto industry. Not just car manufacturers, but suppliers, dealers, repair shops, road construction crews, and so on.

I have bad news for Schwinn. As much as I'd like to see Americans get more daily exercise, this notion of the disappearing American car is complete fiction.

The story they feed the news outlets goes like this. GM goes down, and nobody can ramp up production to replace the GM cars. So the suppliers fail. When the suppliers fail, Ford and Chrysler (which is now a German company, not that anyone has noticed) fail because they have no more parts. So all the dealerships fail, and so does everyone else.

Let's assume that GM can't go into bankruptcy (a silly assumption, but let's assume it anyway). They would then sell all those shiny auto factories to ... who? To the highest bidder, as always. Probably not Ford, or Chrysler LLC, since they have no money. But Honda and Toyota could buy those factories, along with the trademarks, designs, patents, and everything else. Or maybe someone completely different. I suspect Mitt Romney could put together some investors. The point is that someone will pay something, however small, for GM's assets.

So now someone has the factories, designs, trademarks, and patents. What they don't have is the crippling debt, or the union contacts. Will they have trouble finding employees to work at a competitive (non-union) rate? Not a chance. And if Michigan law or union thugs get in the way, the factories will be torn down and moved to Ohio, or Georgia, or Alabama. (And now is a great time for disruptions -- demand is down and inventories are up.)

People want cars. They need them. They'll get them. They will be built.

I don't think many people realize that the conditions at the "Big 3" are preventing competitive forces from working across the industry. The North American Toyota and Honda factories don't experience anything like the competitive pressures that they would face if the factories in Detroit were forced to compete. This is the time for that to happen.

Demand it.