So I know many democratic leaders are pushing for the “Big Three Bailout” (Barack Obama included). Since so many jobs are connected to the auto industry, many believe that we have to bailout Chrysler, Ford, and GM in order to keep Americans employed (I heard on MSNBC that 1/10 jobs have something to do with American cars). Of course, Michigan politicians are pushing for this bailout because a large portion of their constituent base are employees of the auto industry.
I have a problem with this bailout for several reasons. To start, if we the taxpayers give these car makers the money they are demanding, aren’t they just going to continue to under perform and not keep up with the foreign car market? And aren’t they just going to continue to make fuel inefficient cars that Americans no longer want (it took them forever to realize that no one liked the Hummer)?
Bankruptcy sounds like a scary thing. However, it also could be just what the Big Three need. If they are forced into filing for bankruptcy, they will then have to restructure themselves from the bottom up. This could include replacing the CEOs that fly to Washington D.C. to request billions and billions of taxpayer dollars in private jets. More importantly, the companies would have to think about what they need to do to compete in the changing automobile market–will they finally make a decent fuel efficient car?
Throughout Barack Obama’s historic campaign for the office of the President of the United States of America, we all chanted, “Yes We Can!” And we all called for a leader to depart from the failed policies of the current president. But are we following through with our demands by asking for more of the same from our automakers? I don’t think so. In order to move forward as a country, we have to change Detroit. This is not possible if we bail out the Big Three. Let them sink. Then we will get the “change we can believe in.”
Yeah that’s a great idea dude. “Why don’t we let the auto companies fail on the brink of a turn around.” Okay man, I’ve got an even better idea, how about we let the banks fail? Wait we already bailed out the banks to the tune of 700 billion. What is so different about the auto companies?
The auto companies where already changing their strategies when the financial crisis hit. Before the financial crisis GM had already started partnering with Toyata to look beyond internal combustion engines. Ford had begun to produce hybrids that were selling well and their were plans for more.
The damage done to the auto companies by their miss-management was great, but credit crisis is making the turn around they were in the midst of impossible. They need a LOAN from the government, because at the moment they can’t raise the capital they need in the markets and because demand is decreasing ACROSS the board.
Another damn good reason to give the auto companies a loan is National Security. The loss of the auto industry would be the loss of the manufacturing base for wartime production. While the idea of Mass Mobilization and Total War may seem obsolete in the Atomic age, it is not. There is always the possibility of large scale conventional war and if that happens America would be ill-served by the absence of a auto industry.
I also take exception to you’re apparent disregard for the impact a tsunami of unemployment caused by the collapse of not only the auto companies, but their suppliers. If all of those people become unemployed their will be a ripple effect, think of a rock being thrown into a pond, or perhaps a crack in a cars windshield. The businesses that rely on factories would then shut down and then the companies that relied on them would be hurt also. To prevent mass unemployment is to prevent a great depression.
I would like to continue that last point, if the great depression taught us one-thing it should be this, Keynesian economics work. The Chinese government seems to have taken this to heart in the past 20 years and they are succeeding to our dismay. Stimulating the economy is the key to us getting out of this crisis whole, letting the auto companies fail is the exact opposite of stimulating the economy. As we look at the current crisis can you really tell me that letting 3 more large companies fail would be a good idea? Remember it was when Lehman Brothers was allowed to fail that the crisis started to deepen quickly.
As we look forward I think we need to take the lessons of the great depression and John Kynes to heart. We need to spend money and protect industries right now, not the opposite. Large infrastructure projects should be under taken and the auto companies should be given a leg up.
If you let the auto companies fail, you let the nation fail. The good people of America should forgive (and perhaps some penitence is required the leadership.) and help the auto companies. To let the auto companies collapse is to let the nation collapse, we don’t want that, do we?
We may disagree on this issue, but we can both agree that the CEOs are douches.
Mike brings up a lot of good points. I would like to add also that the federal government does have the ability to attach conditions to any money it gives automotive companies. For instance, it could require that a certain amount of the money be used for R & D of more fuel efficient cars. Attaching conditions like this is how you push auto companies towards change, not by letting them collapse.
Also, Mike’s point about the ripple effect of the Big Three deserves some elaboration. Suppliers to these companies, such as Delphi, provide thousands of jobs to Michigan and the rest of the country as well. Delphi, the largest supplier for GM and one of the largest suppliers of car parts in the world, has already declared bankruptcy and is currently working to get out of bankruptcy. In order to do that, it has to raise a lot of money to pay off its debts. GM is providing a large chunk of that money. If it fails, Delphi will not be able to emerge from bankruptcy, and it will have to be liquidated. That would mean losing thousands more jobs than were lost in the first place by Delphi declaring bankruptcy. This is one example of how the Big Three declaring bankruptcy would spread far beyond those individual companies.
Mark, I don’t think we can all agree with that one. They may not make the best of decisions, but I have a feeling the only reason you refer to the CEOs as douches is because they flew on private jets to Washington. Here is the thing, those CEOs are required to travel via corporate jet for safety reasons. If they were to fly commercial they would be in violation of their contracts and stand to lose their jobs. It may be a stupid rule, but they are just doing as they are told. Even CEOs have bosses.
May I also say thank all of you boys for having the most constructive, reasoned back-and-forth this blog has ever seen.
I think we can all agree http://www.ustream.tv/channel/shiba-inu-puppy-cam is awesome.
I may be repeating what’s been said, but I’d like to express my opinion on this anyway. I’m not a fan of bailout. Well I don’t think anyone really is, but regardless, I think the bailout of the Big Three is necessary. True, I come from a state that doesn’t rely on the auto industry for economic support, and for awhile, I was not sure the bailout would be a good idea. But Michigan is my home now, and it’s become a personal issue. We cannot pull the rug out from under them. The bailout of Bear Stearns and all that was one thing- their employees are basically set for life no matter what, they’re all working for JP Morgan now. There are too many working-class citizens involved with this crisis to let the industry fail. Like Mike said, if you let the auto companies fail, you let the nation fail.
The bailout is necessary to protect the working middle class. But its not going to be the driving force that causes the domestic auto industry to change its tune about alternative fuels. The shaky place that all three companies are in won’t allow for them to be pouring money into R&D. Plus the money for the loans to bailout the companies will probably come from money set aside by the department of energy for alternative fuel development.
Just kidding. Bear Stearns did not get bailed out it merged with JP Morgan. But the point is, bailing out large financial firms is different from bailing out the auto industry.