Worst nightmare for General Motors Corp., Ford Motor Co., employees, suppliers and stockholders reared menacingly last week. American customers are concerned.
The old "yellow menace" of once-thought bygone days is alive and well and starting to manufacture automobiles in China.
Who can forget Japan and South Korea's similar venture into the United States' once near-monopoly by the Big Three automakers?
The Chrysler Motor Car Co. succumbed in 1998 despite heroic efforts by the company, stockholders and the U.S. government to save it.
Our two remaining car giants got a wake up call recently by Germany's Daimler-Chrysler chief executive, Ruediger Grube. He told reporters at the Shanghai Auto Show that his company will build a small-car factory in China for export to the United States.
Joint talks about the project between Daimler and joint-venture partners are expected to be completed within six months.
Daimler, be it remembered, inherited the bones of Chrysler when it collapsed.
China already manufactures many automobile parts for vehicles in other countries, including parking brakes and seat covers to the U.S.
More complex parts like gears are being manufactured for other companies abroad. Chinese authorities are working hard to improve quality.
Fully assembled cars by Chinese-owned automakers have already begun to developing nations in South America, Africa and the Middle East.
Industry analysts say "significant numbers" of cars will be shipped from Chinese plants to the U.S. and Europe within three years. Robert A. Lutz, vice chairman of General Motors, says "at least one" Chinese firm will be exporting in five years.
Whatever. General Motors and Ford have their backs to the wall.
Chinese entrepreneurs have been suppressed by high costs of quality steel, a shortage of experienced engineers and an anti-capitalism government. However, the political leaders are being drawn - kicking and screaming - into the 21st Century global economy.
General Motors and Ford executives are faced with reality -- and the difficulty of convincing their labor unions to get real.
Ron Gettelfinger, president of the United Automobile Workers, last week denounced Daimler's plans:
"The $1.50-to-$1.95-per-hour labor cost in the Chinese auto industry is not arrived at by any 'natural' operations of a free market. It comes by through artificial repression of wages by a brutal regime which outlaws independent trade unions, and jails more labor activists than any country in the world!"
He declares: "China's repression of its workers, and manipulation of its currency, are unfair trade practices which must no longer be tolerated by the U.S. government."
Gettlefinger is correct in his analysis of the Chinese government. Yet, he is naive in believing the U.S. government can do more than jawbone the problem.
China has the largest population in the world that is ambitious, hard working and prone to revolution. Who is to bell the dragon? Americans can fight only one war at a time.
An improving economy in China eventually will bring competition for labor and market. One may not like the level, or time requirement, but the alternatives are more unpalatable.
Damiler-Chrysler's Chinese forecast shook short-time investors. Many took their General Motors and Ford stakes elsewhere.
Automobile stocks declined sharply, but recovered when famed investor Kirk Kerkorian bought 22 million shares of GM shares on the open market and offered to buy 28 million more.
Nevertheless, the Standard & Poors investments rating firm, downgraded GM and Ford bonds to "junk" status.
S&P based its conclusion on the companies "sluggish sales and declining market share in the face of growing competition from overseas automakers."
Also, on "whether their management strategies are sufficient to counteract mounting challenges."
It cited their financial commitments to retirees for exceptional pension and health care costs. GM is said to be the nation's largest private health-care provider with l.1 million workers, retirees and their families.
Industry analysts blame sluggish GM and Ford sales on high gasoline prices and emphasis on oversize cars with poor mileage.
G.M, Ford, and the UAW will huff and puff, but they will build more efficient cars at lower labor costs. They have no other choice.
Charles E. Wilson, chief executive officer of G.M. in 1953, had it right when he famously declared - to great criticism:
"What is good for the country is good for General Motors, and vice versa."
Lindsey Williams is a Sun columnist who can be contacted at:
Website: http://www.lindseywilliams.org
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