Before the credit crisis arrived with devastating effects on Wall Street and Main Street, the U.S. auto industry was in the midst of a dramatic transformation. It was embracing new technologies, launching compelling new products, revamping labor-management . . .

Before the credit crisis arrived with devastating effects on Wall Street and Main Street, the U.S. auto industry was in the midst of a dramatic transformation. It was embracing new technologies, launching compelling new products, revamping labor-management relations and restructuring operations world wide. Now all that progress is threatened, and it’s a threat not only to domestic automakers but also to America’s global competitiveness.

Prior to this financial crisis, the U.S. auto industry was aggressively and successfully restructuring. U.S.-based companies have eliminated the productivity gap with leading import carmakers, according to the authoritative Harbour Report. And quality experts such as J.D. Power and Associates reported that GM has all but closed the quality gap with Asian carmakers. In just the last three years, the Chevy Malibu and the Saturn Aura were both named North American Car of the Year, and the Cadillac CTS was named Motor Trend’s Car of the Year

GM and the rest of the domestic auto industry are playing a leading role in developing and bringing to market high-quality vehicles that use less fuel and emit fewer greenhouse gases – products that promise to transform personal transportation in the 21st century. Consider the Chevrolet Equinox Fuel Cell vehicle that is already being driven in everyday road condition in Southern California, New York and Washington, D.C. GM has deployed 100 of these hydrogen fuel-cell vehicles to gain real world experience about this cutting edge technology.

The Chevy Volt, an extended-range electric vehicle slated for sale in late 2010, will deliver 40 miles of gasoline- and emission-free driving on a single charge, enough for the daily commutes of most Americans. A small gas-powered range-extender will create additional electricity to provide hundreds of miles of additional driving. The Volt can be recharged in only three hours using a 240v outlet, the same as used by a clothes dryer (or you can use a regular household 120v outlet for an eight-hour recharge).

GM already has created a broad hybrid portfolio with six models now on the road -- including the most affordable hybrid SUV, the Saturn Vue Hybrid – and will have nine hybrids on the market by mid-2009.

These new alternative fuel vehicles represent nothing less than the reinvention of the automobile.

The domestic auto industry has not been standing still in the face of growing global competition before this financial tsunami struck. GM has made many difficult decisions to change the way its business operates, and these moves are creating a leaner, more efficient and modern corporation. This has been a complex and sometimes painful process, but a necessary one for a company that observed its 100th anniversary in September.

Since 2000 GM has reduced its U.S. salaried workforce from 44,000 to 32,000 this year, and its hourly workforce from 132,000 to 64,000. Earlier this year, it revamped health-care coverage for retirees over 65 who are eligible for Medicare. In response to the economic crisis, GM is further tightening its belt. The company recently took additional actions to reduce salaried employment costs by 20 percent, drop raises and discretionary bonuses for executive and management employees, and suspend the 401(k) match for salaried employees. In addition, GM has closed plants in the U.S., Canada, and Mexico where it built full-sized pickups, full-sized SUVs, and medium-duty trucks and has undertaken a strategic review of the Hummer brand.

Last year, GM, Ford and Chrysler reached historic agreements with the United Auto Workers union to transfer responsibility for delivering health-care benefits to workers and their families, demonstrating emphatically that labor and management can work together to meet the challenges of global competition. As a result, GM’s health-care liability alone will be reduced from an annual average of $7 billion over the last 15 years to approximately $1 billion per year in 2010, making GM more competitive in North America as well as in the global marketplace.

The domestic auto industry employs a quarter of a million workers and provides health care benefits to two million Americans and pension benefits to more than a million retirees and spouses. Parts makers employ hundreds of thousands more. The domestic auto industry invests $10 billion a year in U.S. plants and equipment and about $12 billion annually in research and development – second only to the semiconductor industry.

It is unthinkable to refuse to help this job-creating industry at a time when it urgently needs assistance to complete its transformation. More than the future of this industry is at stake. It is also a question of maintaining the ability of the U.S. to compete effectively in the global economy. Government action now can save a critical American industry and at the same time help maintain U.S. competitiveness and meet vital economic, energy and environmental goals.