Justice dips into the reader mailbag regarding last week's piece on the automakers.

Thanks again to all of you who wrote in response to Friday’s automaker piece -- even the guy who called me long-winded. I won’t try to rehash all the nice things that were said, but I will say it was good to see positive feedback outweigh negative by more than 10-to-1.

As fate would have it, GM reported a second-quarter loss of $15.5 billion (the third-biggest in its 100-year history) on Friday, too. Shares fell 11% on the news. On top of that, U.S. auto sales slumped to a 16-year low in July, and Chrysler just came up $6 billion shy on a major round of debt refinancing.

Is Motor City on the ropes? Is it time to hoard food? I couldn’t post every thoughtful message, so I tried to pick a cross-section of some of the more common themes. Let’s dig into the mailbag and find out what you had to say.

It is a refreshment to read your views in contrast to the never-ending goofiness, lies and sheer propaganda on Bloomberg, CNBC, et al... I enjoy 99.9 % of yours. The small fraction I don't like is the following old saw:

“At home they are drowning in red ink, thanks to sky-high labor costs.” I simply don't agree that any industry should survive off the backs of its workers. We tried the global cheap-labor route and see where it got us. Perhaps bring back slavery? After all we brought back torture? Paying a decent wage was never the problem, it was greed and all the wrong policies you so rightly point out. Keep up the great work!

-- Taipan Daily reader Alexander T.

Thanks for the kind words! I don’t expect industry to “survive off the backs of its workers” either... at least not in the harsh manner you imply. But the root of the U.S. automakers’ problems comes down to a lot more than just honest work for honest pay, in my humble opinion. It stems from greed and a lack of willingness to change.

Half a century or so ago, U.S. manufacturing was riding high. General Motors was a profit-spewing juggernaut, and the big automakers were focused on growing as fast as they could. These were the conditions in which the unions made balance-sheet-busting long-term deals with management. Nobody figured the costs of these deals would be a problem, because huge profits were projected as far as the eye could see.

As the years rolled by new competition came in, quality demands shot up, and the big profits of old disappeared. The gravy train dried up. But the unions stuck to their guns, refusing to let go of the lucrative deals they made in fatter times. And slowly the big automakers found themselves strangled by costs, as profit margins withered away but obligations didn’t.

What’s the answer? I’m not sure. But I don’t think running the Big Three into the ground counts as a real solution. That’s just passing the buck to taxpayers. The real rub is in figuring out what it means for a wage to be “fair” in the first place, since the concept of fairness doesn’t really exist in nature. There are all kinds of ways to approach the question, and others to consider alongside the workers when asking it.

I'm 87 years old and I've seen what's happening today since 1954, yes, since 1954. Way back then I clearly saw the outcome of Washington D.C.'s sell out of the United States Constitution and the people. I expected the current crisis long before now, but I failed to account for Printing Press Paper and just how much trash the Fed could pump into the economy... VOTE AGAINST ALL INCUMBENTS IN NOVEMBER...

-- Taipan Daily reader W.E.

Heck yeah! Throw the bums out! Come to think of it, when it comes to politicians, that’s almost always good advice, yes? Even the rare “good” pols are likely to go bad if they hang around the halls of power long enough. And when it comes to running the country, the best man for the job is the one who doesn’t really want it, but takes it out of a sense of duty and responsibility anyway. Unfortunately, we’ll never see a man (or woman) of such sober temperament in the White House. The election process is such a brutal gauntlet of superficial self-abuse, only power-mad narcissists could want the gig in the first place.

This may sound crazy, but if we, the taxpayer, have to bailout these shortsighted auto manufacturers (pushing SUV's and trucks the last several years), then we, as taxpayers, should get a free fuel-efficient car after they have designed and built them. It would be a payback for the bailout and a way to retire all the gas-guzzlers.

-- Taipan Daily reader Richard S.

Heh. Yep, Richard, that does sound a little bit crazy. The trouble is that top-down mandates almost never work. If we told the Big Three they had to build a “people’s electric car” in retribution for their sins, the end result would probably be on par with the junkers the Soviets built under communist rule.

In terms of retiring all the gas guzzlers, it’ll be interesting to see what happens. The free market is already working on that, too, by way of painful gas prices. In fact, Elon Musk, the Silicon Valley mogul behind companies like SpaceX and Tesla Motors, thinks the majority of all cars will be pure electric in 30 years. He also sees wide-scale solar technology powering all those cars. The guy could just be talking his book (as Tesla Motors is an electric car company), but you never know...

I enjoyed the perspective on your Detroit article and the manufacturing aspect. In light of what you are saying, do you see any reality to the Wall Street Journal article claiming Americans should begin to hoard food as the scarce commodities begin to be in short supply? I am not a conspiratorial believer, but the recent food shortages overseas do give one food for thought (no pun intended). Do you see bread hitting $8 a loaf in 2009?

-- Taipan Daily reader Dan B.

Hi, Dan. When it comes to food prices, I’m actually more worried about the third world than the Western world. If things got bad enough for you and I to see $8 bread, that would mean global starvation on a mass scale in countries too poor to cope. We’d be seeing cracks in the system of trade big enough to stir military fears. Multiple “basket case” countries would be in danger of internal collapse, putting their neighbors on high alert for civil unrest and floods of hungry refugees. The failure of the food chain would lead to multiple new failed states. That kind of scenario creates tension all around... just the worst kind of backdrop for a flare-up that could turn into a shooting war.

Boy, really light and cheery this week, eh? The good news is, I don’t necessarily see things going that far (to $8 bread, I mean). I think the world has plenty more problems ahead, but at the end of the day we’ll figure out how to get people fed.

Depending on how much you drive, I might even think more about hoarding gasoline than food. If things ever did get to $8 bread, it would probably have something to do with transportation costs shooting to the moon on a panic-type fuel shortage.

Storing gas isn’t for me, though. I’d almost be more worried about the summer heat in my garage. When it comes to certain macro events, I’m prepared to take a few chances here and there... some potential threats are so catastrophic, there’s no real way to prepare for them in the first place. Heck, even solid gold bullion might not be worth much if we end up in a Mad Max: Beyond Thunderdome-type environment. I don’t think that’ll happen, though. I think there’s more pain to come for the West, but we’ll make it through.

Warm Regards,

JL