The main argument to maintain domestic-based automakers begins with nearly $20 billion in annual R&D spending that goes towards important objectives such as investing in lithium ion battery technology and other technologically important developments that create and sustain high-tech jobs and research in the United States. Yes, I have seen the way the automakers burn through cash, between Ford (F) and GM (GM) it was about $15 billion in the third quarter. Don't forget that this was going on during the backdrop of the biggest drop in durable goods spending since the early eighties recession and the biggest drop in automobile sales since WWII. (To exacerbate this stark depiction of how fast things went on the fritz, Ford actually turned a profit in the first quarter.

The argument that the Detroit 3 are some of the most 'inefficiently' run companies in America is completely subjective. With the painstaking cost-cutting measures put into action by the UAW contract last year, the cost differentials between union employees and those at foreign automakers with American operations will begin to drastically narrow as the Detroit 3 unload their health care obligations and drastically reduce the pay of new UAW workers (simultaneously as old workers receive buyouts) into 2009. These savings alone will amount to tens of billions of dollars a year. Meanwhile, the domestic manufacturers have been coming out with products that have leveled the quality gap while also preparing for the release of the first commercially available electric-based plug-in hybrid automobile.

There has been much ado lately about the very sick state of our domestic auto industry. As you may know, Rick Wagoner, CEO of [[GM]], has been lobbying the Treasury and the White House for approximately $10 billion in funds, which is supposedly needed to push through a merger between General Motors and Chrysler (majority owner by Cerberus Capital, which acquired 80.1% of Chrysler from Daimler AG (DAI) for $7.4 billion last year). It seems that no one has the want or the ability to lend GM the money in the private sector, their creditors included. So apparently Mr. Wagoner goes to Washington can be seen as sort of a last ditch effort. The trouble is, the Treasury announced on Halloween that there would be no treats awarded to Wagoner and his lobbying efforts and that GM would not receive a loan to bail out Chrysler.

Was this the right move? Let's start with the business position of the two companies: General Motors is burning through over a billion in cash every month like a pyromaniac. With about $20 billion dollars in cash, analysts estimate that GM needs at least $14 billion to maintain operations. Analysts expect that, with 14 million units in industry sales next year, GM will be down to the wire by the end of the summer. That outlook is awfully rosy, as some analysts have estimated 12 million units or worse (outlays for all durable goods items year-over-year for the third quarter were down by double-digit figures and will almost certainly get worse).