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Sunday, November 16, 2008

Me & the Big 3

Although I recently wrote about the enormous financial crisis that was going on nationally and internationally, I wanted to take a blog post to document how this historic event is impacting me personally. I'll start with H first, since he's easy & it's good news. He's in sales for a commercial printer & is doing fabulous lately! He's landed some big accounts that are hopefully recession proof and will not need to worry about the economic downturn, at least for now.

Luckily, things in Houston are still pretty good overall. There have been huge influxes of people moving into the greater Houston area. The continued growth is always good for the economy, and new Houstonians have resulted steadily increased the urban sprawl. With plenty of space to spread out further into the exurbs, the housing prices have not sky-rocketed like in other areas. Housing prices have made moderate gains, especially those in the city that offer shorter commutes to downtown jobs. My father works in construction, but has found the last few years difficult in the construction industry despite the general boom in the field. From him, more people are buying track-homes in pre-planned neighborhoods. More people are simply looking for the cheapest construction option without regard to builder quality or experience. Luckily, he's got a few very large projects that he is working on and a great deal of post-Hurricane Ike clean up and repair business.

The mainstay of the Houston economy is still energy: oil, gas and related industries. These companies are mostly still doing well, especially when oil prices were at record-breaking high levels. Hopefully these business will continue to thrive and be minimally impacted by an economic downturn. Personally, my mom works for subsidiary of the largest oil company, and she feels pretty secure about her job and the company future. She's been working on their international side of business and hopes to travel more in the future.

I do get the sense that people are cutting back in other ways around town though. I've noticed several restaurants, including an Outback and Joe's Crab shack, closed shop. I'm hoping those were more about a bad location and not mostly about a business slowdown. It seems that some of the restaurants near us aren't as crowded and the wait to get a seat is sometimes shorter. Nationally, Circuit City and Linen -n- Things are both going out of business.

So that's the current state of the economy from my point of view, in my little corner of town and my family. I'd intended to write this post mostly about the Big 3 automobile manufacturers and their teetering on the brink of failure. It's been widely known for years that they are all struggling to remain competitive with foreign car makers. Entire books have been devoted to the many reasons why they are in their current predicament, but I'll summarize my opinions about why they are in this position. Their products over the last few decades have created quite the perception problem, as people think they are inferior in quality and styling to foreign cars. They've failed to see the trends towards smaller, more fuel efficient cars and hybrid vehicles. Additionally, gross mis-management of production and business decisions resulted in poor financial positions. Finally, the outrageous demands by the unions for incredibly high wages for unskilled workers and unheard of generosity with pension plans and medical benefits have created an financial burden than can never be maintained long term in a competitive global market.

I'd known all these things for years and I had always assumed it really didn't matter to me. These companies would go bankrupt or merge or figure out a way to be profitable. However, over the last 6 months, it has become very clear that both GM and Chrysler are at their breaking point. They have been begging DC for a bailout and threatening that they will not make it to the end of the year. I hear the dire predictions about what it would mean for the Big 3 to fail. I'm very torn about what I think should be done. The old conservative in me thinks they should just be allowed to fail as a natural part of capitalism. Another part of me grasps what a huge deal this would be nationwide to all those who are employed in a related field or industry (like me). Those who own Big 3 cars that are still under warranty, suppliers & parts dealers, dealerships, small towns that revolved around these industries would all be devastated.

Almost all of my work is for auto manufactures, who need engineering work in the legal arena. I'm not sure if or when a bailout will reach the Big 3, or what impact their near failure will have on my business. Though I'd once naively believed that lawsuits and litigation were recession proof, I've come to understand that tort reform and the threat of bankruptcy can have quite a persuasive effect on deterring lawsuits. I'd never really worried that this economic meltdown would affect me too much with my job or living in Houston, but it's looking more like a real possibility that it will.
GOOD NEWS OF THE DAY: For the time being, H & I are in a good financial position. Hopefully things will not get much worse in the local market or in my industry.


Courtney said...

Hopefully things will turn around FAST

Delilah and Rocket said...

Try living in metro-Detroit and having a governor from Canada who allows trash from Canada into Michigan. It sucks. There's a lot of highly skilled hourly workers at GM-master electricions, master pipe fitters, etc .... most of your comments are true but a few are really off. I could write you a dissertation about GM hourly skilled trades vs. GM management and you'd come away with a very different view of the UAW & GM management.