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The fundamental problem is that Detroit made cars no one wanted to buy for decades. Blaming the unions even 50% is over the top when unions do not design cars. In fact, unions need companies actually sell product if the contracts they work so hard to negotiate are to be fulfilled.




I don't see how your example is the even close to the fundamental problem with the auto industry. Over the past few years, the NA trend was to live lavishly and take on lots of freely available debt. In turn, this meant buying the biggest available vehicle to meet your lifestyle. The NA auto companies marketed and actually made off relatively well by targetting the highly cyclical demand.

Now, they are in a jam based on a few specific reasons that I can think of.

1) The economy. People aren't taking on any excess debt and/or are having trouble getting credit to buy vehicles. This leads to less purchased vehicles meaning less profit. This can also be attributed to the cyclical factor that when the economy gets back to normal, people will begin to purchase more vehicles. The population isn't getting any smaller, people are going to need cars no matter what.

2) The market share doesn't only belong the BIG 3 anymore. Without quoting any numbers, I'm pretty sure the big 3 only account for barely 50% of the total market share of sold vehicles. When there are something like 8 direct (and more efficient) competitors, you can't expect profits to stay where they were in the good ole days.

3) Labour Unions. Again, labour unions are holding these companies ransom with bargaining and striking. The union leaders still think/act like it's 1960 and the big 3 control 90% of the market. Wrong.

The bailout needs to take place to rescue the economy, but restructuring needs to be the main priority of this whole debacle.