Economist urges tough love for Big 3

WASHINGTON, Dec. 9 (UPI) -- The Big Three automakers need to cut wages, pare debt and improve management if they are to avoid bankruptcy, a prominent U.S. economist said Tuesday.

University of Maryland Business School Professor Peter Morici, a former chief economist at the U.S. International Trade Commission, told the House Select Committee on Energy Independence and Global Warming in Washington that federal loans would only forestall the inevitable without those drastic steps by the cash-hemorrhaging car makers and would be "a poor policy choice" by Congress.

"If the Detroit Three, with the cooperation of the (United Auto Workers), cannot present plans to Congress that would fully and completely align their labor costs and work rule flexibility with Japanese transplants, and demonstrate how their vehicle development and distribution costs can (be) similarly aligned, it would be better to let them go through Chapter 11 and re-emerge with new labor agreements, dramatically reduced debt and strengthened management," Morici said in remarks prepared for delivery to the congressional panel.

Even with those cost-saving measures, the domestic automakers would be on an unlevel playing field with overseas competitors "who enjoy great advantages owing to currency and trade policies pursued by their governments," he said.

And, he said, going through reorganization now rather than later, will save more jobs in the long run.

Morici said Congress could further help Detroit by improving addressing undervalued currencies in Asia and offering Americans incentives to trade in gas guzzlers for new, more fuel-efficient models.