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Painful Cost-Cutting, Layoffs Underway in US Auto Industry

The U.S.-based auto industry is in crisis. Groaning under the weight of billions of dollars of financial losses, collapsing stock prices and unrelenting erosion of market share to foreign competitors, Detroit-based Ford and General Motors are fighting for their lives. VOA's Barry Wood reports on the turmoil rippling through the heartland of American industry.

Auto industry leaders said recently:

Steve Miller, Delphi CEO
"Today we are paying double, triple or more for hourly labor compared to what prevails in the marketplace."

Rick Wagoner, GM Chairman
"We expect to reduce our manufacturing employment in the United States by 25,000."

Bill Ford, Ford Motor Co. Chairman
"These cuts are a painful last resort."

It's been a terrible year for American car companies. The jobs of 100,000 workers are at risk. Delphi, the world's biggest parts manufacturer, declared bankruptcy saying it can no longer finance pensions and health care. Chief executive officer Steve Miller:

"Philosophers can speculate about fairness. I have to deal with reality."

Job losses and wage cuts have devastating effects for workers.

One employee says she regrets the industry actions. "I would really hate to see this job go. I mean, because it's gonna hurt."

Peter Morici, a business professor at the University of Maryland, blames the car companies and the United Auto Workers Union, the UAW. Ford and GM, he says, built cars consumers didn't want while the union demanded too much.

"UAW workers have not been educated about how out of line their pay and benefits are relative to competitive global realities, or even the competitive realities of dealing with Toyota and Nissan in places like Kentucky."

The foreign car makers -- with a big cost advantage and popular products-- are expanding non-unionized U.S. plants, mainly in the south.

Anne Stevens, chief of Ford North America, says new fuel efficient vehicles will save Ford. "I don't think we're late with hybrids. We brought out the first full American hybrid. We brought out the first SUV hybrid."

Peter Morici is skeptical, "Longer term, if they don't accomplish the kind of changes that are necessary they will continue to lose market share, run out of cash and eventually go through Chapter 11 [bankruptcy]."

Economist Rob Scott of Washington's Economic Policy Institute says Ford and GM -- like some airlines -- could use bankruptcy to cut wages and reduce costs. "This is the new model of how companies restructure in a globally competitive economy."

Mr. Scott says the industry may need a government bailout [financial rescue]. And he says unless it safeguards its industrial base America could go the way of 19th century Britain. "They had the highest standard of living in the world. But what happened is that that power dissipated. The costs of empire drained the coffers of the British system. They refused to invest. They moved their factories abroad."

U.S. industry, says Mr. Scott, stands at the precipice.