December 12, 2008 ... Auto wreck.

In response to the failure of the $14-billion bailout package, US Senate majority leader Harry Reid, said: "We have not been able to get this over the finish line" And, by the magic of Hollywood accounting, it is claimed that one in ten of the US workforce will now face the prospect of redundancy.

It is true that there will be a significant impact on auto workers' and supply chain job prospects, but this will only be temporary. This is simply because the US auto industry already has the latest technology in place as a consequence of its investments and partnerships with auto manufacturing in Japan, Asia and Europe. Opel, a subsidiary of GM, has the models applicable for the majority of the US auto market, and also has advanced research and development facilities in Russleheim, Germany, which GM is loath to relinquish for a quick cash settlement in lieu of a multi-billion dollar bailout from Washington. A bailout which Washington is loath to provide, since it is also underwriting overseas subsidiaries, such as Opel, and which Germany's Bundestag is loath to guarantee loans for, since, as per the magic of Hollywood accounting, Germany would end up guaranteeing loans for GM via Opel.

In a recent BBC Hardtalk interview with Stephen Sackur, Carly Fiorina, formerly of HP-Compaq and possible Republican candidate, made it perfectly clear that the US auto industry was a mess and would need a sum of money hugely in excess of the originally proposed $23-billion bailout package to have the slightest impact on what are the consequences of short-term management practices bolstered by aggressive lobbying in Washington, over decades.

Thus, the US auto industry must consolidate its manufacturing base in the US and make use of what is already available from its overseas holdings and investments.

Far from optimal, but it would make better sense for a fraction of the $14-billion to be allocated towards training those auto and supply chain workers who will not be auto and/or supply chain workers any longer, in other lines of activity, so as to be better able to avail themselves of the opportunities which will occur, so long as huge amounts of capital are not misdirected into a US auto industry which must comply with market demands.

The historical parallel to what the US auto industry is demanding from Washington is the auto and electronics industries of the UK of the 1970s. During that period in which the UK became technically bankrupt, highly subsidised labour in those highly subsidised industries demanded ever higher wages and benefits via product for export, but they themselves chose to purchase the superior Japanese imports from Nissan and Hitachi in lieu of their own British Leyland and ITT output. Similarly, the US auto manufacturers must supply what the demand can buy from elsewhere, and would exclusively prefer to buy except for the very high import taxes on imports.

And what to do with all those unsold 4X4s and SUVs. Well... there's a lot of potential in Afghanistan, Iraq and Africa, where there are very few decent roads and gas is cheap, for this class of vehicle.