The greatest hurdle to the recovery of the auto industry may not be the credit crisis or high gas prices. It may be the UAW. If it decides not to play ball as part of a federal government bailout, the $25 billion being proposed in an aid package may not be enough, and Congress may decide to abandon the plan completely,

According to the FT, "The US United Auto Workers (UAW) union has ruled out concessions – at least for the time being – to help rescue the ailing Detroit-based car industry." Of course, the argument is deeply flawed and is the kind of logic that has helped bring the industry to its knees. Management blames labor. Labor blames management. Both blame the credit crisis. It is a neat circle which leads nowhere and does not do any of the parties any good.

Imagine being a member of Congress handing out billion of dollars that many taxpayers think should not go to an industry that has wounded itself and many economists say will not ultimately save the US car companies. If the parties who will get the benefit are fighting among themselves, the chance that a rescue can be successful is almost certain to be destroyed.

Detroit has shot itself in the foot. Now, it can move the gun to its head.

Douglas A. McIntyre is an editor at 24/7 Wall St.

The UAW says that troubles in the car industry are not its fault. According to the union, it was not a series of bad decisions by management either.

"This industry is in a crisis situation not of its own making," Ron Gettelfinger said in an interview Saturday afternoon with The Wall Street Journal (subscription required).

The statement is worth a bit of examination.

Gas prices have been historically low, well under $2 a gallon. The real spike is only a year old and the price per gallon is now back to $2 in many regions of the country. So, did a price pop which lasted three quarters of a year bring down The Big Three?

The other culprit Gettelfinger points to is the problems in the credit markets. Most consumers did not have trouble getting car loans as recent as this summer. Auto companies were offering zero percent financing and thousands of dollars in cash back Buying a car on credit was as easy as getting a subprime loan was three years ago.

The UAW did not ask for exorbitant wages and benefits over the last four decades. Management at the car companies did not rely on SUVs and pick-ups for profits even though they had seen the tremendous damage that the Arab Oil Embargo did to their finances in the 1970s.

In other words, no one involved in the car industry is to blame.

Douglas A. McIntyre is an editor at 24/7 Wall St.

Detroit's Big Three automakers are finding out assistance is a two-sided process.

President-elect Barack Obama is backing a plan in which U.S. automakers would receive $50 billion in federal aid in exchange for structural changes and oversight by an auto czar or board. An auto czar or board would be patterned after the bailout of Chrysler in 1979 or the City of New York in 1975.

During those two assistance / loan guarantee efforts, the U.S. Government ended up making money on the deals. The revamped Chrysler returned to profitability and actually led both General Motors and Ford in several vehicle categories in the ensuing decades. The streamlined, pro-business City of New York experienced an economic, civic, and cultural renaissance in the 1990s that was surpassed only by the 'Roaring 20s.'

Economist David H. Wang told BloggingStocks Thursday a bankruptcy by General Motors or Ford "is economically and psychologically unacceptable." If both filed for bankruptcy and operations were disrupted, "U.S. unemployment would soar over 10%" and the U.S. economy would incur into its deepest recession since the 1981-82 Reagan Administration recession, he said.

The car manufacturers of Europe will ask for $55 billion in loan guarantees to upgrade their factories to build more fuel-efficient cars. The proposed arrangement looks a lot like the one just put together by the U.S. government and the Big Three American automakers.

According to The Wall Street Journal (subscription required), "Fiat suggested the request to European auto executives at a board meeting of ACEA, the European Auto Makers Association on Friday."

Perhaps Japanese, Chinese, and Korean car companies can call for similar help, and the value of auto loan guarantees around the world can approach $200 billion.

While governments try to bear the burden of a worldwide financial meltdown, more and more struggling industries will ask for assistance. The airline industry may be next; it's being badly hurt by high fuel prices. Food companies may want aid because of rising commodities costs. Refiners are being hurt by high oil prices and may need a hand as well.

So, the question becomes, will governments decide which industries make it?

Douglas A. McIntyre is an editor at 247wallst.com.

The Big Three seem to think that they are troubled money center banks. They want Washington to get them out of their financial problems. According to The Wall Street Journal, "Battered by high gasoline prices and weakened earnings, the Big Three auto makers and their suppliers are now seeking significantly more help from Washington in the form of government-backed loans than the $25 billion they had previously been authorized to receive."

While the auto companies are important to the U.S. economy, they can be "replaced." If General Motors (NYSE: GM) or Ford (NYSE: F) fail, their brands and manufacturing facilities will almost certainly be bought by an overseas car company. VW has said it would like a larger market share in the U.S. So has Nissan. Both have the balance sheet to buy assets from a failed U.S. car company.

There is a sort of cruel reality to the thought that companies considered pillars of the U.S. economy could be gone sometime soon. It is certainly an indication that manufacturing is become less and less critical to the overall GDP of America. It is also a sign the the inefficiency of Detroit's habits have finally gotten so severe that it needs to turn to the government and not the capital markets for aid.

If the car companies cannot make it and cannot raise money on their own, they should be allowed to fail. That may mean that Toyota (NYSE: TM) will become the largest seller of cars in the U.S., but there was never any rule that said bad management would continually be rewarded.

Douglas A. McIntyre is an editor at 247wallst.com.

Big Three automakers General Motors (NYSE: GM), Ford (NYSE: F) and Chrysler plan to decrease production of full-size pickups - - including curtailing production for all or part of January 2008, due to a slowing economy that's expected to decrease sales, The Wall Street Journal reported Friday.

Earlier this week General Motors announced it will impose a two-week shutdown at its pickup truck plants in January 2008.

Ford said its truck plants would likely reduce overtime or impose temporary shutdowns in January 2008 as part of its Q1 production cutback.

Chrysler LLC said it will stop production at plants in Warren, Mich., and Fenton, Mo., right before Christmas through all of January 2008.

Detroit's Big Three, General Motors (NYSE: GM), Ford (NYSE: F) and Chrysler have often been criticized for their bureaucracy, slow decision making, and, at times, outright inertia...even when conditions required bold, decisive action.

There's the joke about the five General Motors executives that go on a camping trip in the Great Midwest. Suddenly, they spot a bear 600 feet away and charging toward where they're seated at the camp site.

Each executive has a rifle and is ready to shoot the bear to defend the campers, and the senior executive says: "Allright, Executives, ready, aim, aim, aim, aim, aim, aim, aim, aim, aim..."

Honda Motor Co (NYSE: HMC) is increasing its capacity by 15% in North America to keep up with the growing demand for its fuel-efficient cars. According to the Associated Press, President Takeo Fukui told reporters that annual production will hit 1.62 million vehicles by 2008, up from 1.4 million. A new auto plant will be built in Indiana, Honda's seventh in North America, and is slated to begin production in late 2008, Fukui said.

Overall, demand has been healthy for Honda's cars in America. Honda has a reputation for good mileage at a time when gas prices are reaching record levels. In comparison, American carmakers are fighting a losing battle against Honda and other foreign carmakers to regain its once-superior positioning. As a group, the market share of Detroit's Big Three slid in June to 50.2% from 56.1% a year earlier.

The Big Three are suffering from a problem they chose nearly a decade ago: focus on inefficient sport-utility vehicles and pickup trucks, instead of fuel-efficient cars.

Much has been made recently of the problems DaimlerChrysler AG (NYSE:DCX) has with its Chrysler unit and the prospect that the unit may be sold.

There has been speculation that it will end up in the hands of private equity firms. Let's hope so. This may be among the best hopes for our struggling domestic auto industry.

First, some have suggested that the deal is too large for PE firms. This is just not the case. Industry experts peg the value of the deal at $60 billion, about equal to Chrysler's annual revenue.

General Motors Corp. (NYSE:GM) says it has cut $9 billion in annual costs. Ford Motor Co. (NYSE:F) is working on lowering expenses by over $5 billion a year. DaimlerChrysler AG (NYSE:DCX) has sent German executives to the U.S. Chrysler Group to try to take $1,000 in expenses out of every Chrysler vehicle. Inventories for The Big Three are so high that dealers do not want to take new cars, even the 2007 models.

Now, industry analysts are worried that 2007 annual car sales could fall well below estimates from GM and Toyota Motor Corp. (NYSE:TM). The two big car companies are forecasting U.S. sales next year at 16.5 million [subscription required].

Trouble in the U.S. housing market, especially in big states like California, could cut sales to 16.2 million units, according to some industry experts. Toyota may be effected because California is a key sales territory in the U.S. The Japanese car giant, however, has the financial resources to weather the trouble.

If sales slow, the company that may be hurt the most is Ford. There is already talk of its bankruptcy. The company itself is saying its market share in the U.S. could drop as low as 14%. What if that 14% share is one of a shrinking market?

Ford execs may have to go back to the drawing board once again.

Douglas McIntyre is a partner at 24/7 Wall St.

One of America's most memorable newspaper headlines -- Ford to City: Drop Dead -- appeared in the New York Daily News on October 30, 1975 when President Gerald R. Ford declined an opportunity to bail out New York City from its fiscal crisis. Today, U.S. auto industry leaders will meet with President Bush and ask for government help with their problems.

As I've noted before, in recent years U.S. automobile manufacturers have made their money on financing cars, not selling them. Competitors from Japan, such as Toyota Motor Corporation (ADR) (NYSE: TM) make cars that customers want with better gas mileage and higher quality than U.S. models. Moreover, customers are willing to pay more for Toyota's cars as TM charges 14% more on average for a vehicle than General Motors Corp. (NYSE: GM) does.

The auto manufacturers want government help with reducing health care costs and currency exchange rates. Beyond speeches, I don't know what will actually change as a result of today's meeting. Yet since Motown is generally a Democratic party stronghold, I'd be surprised if much will happen. Meanwhile, I think the U.S. automakers should devote more management time to making cars that will compete with Toyota's on fuel efficiency and quality and less time seeking government bailouts.

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm, and a Professor of Management at Babson College. He has no financial interest in General Motors or Toyota.