By: Larry MacDonald
It’s a bull market in bailouts. The banks were first. Now it’s the auto companies. Whose next?
The banks perhaps made sense since the whole economy collapses if there is no lending. But the auto companies? Sure, they have received government support before. But it’s mostly been about politics, hasn’t it? The fear of big unions at election time?
The problem with using taxpayers’ money to bail out the auto companies — as they are presently structured — is that their high costs of production will be left in tact and North American cars will remain uncompetitive. In short, it’s not a long-term solution. Foreign manufacturers will continue to eat their lunch and there will be a need for more bailouts down the road.
The real solution is to get costs down and productivity up. The best thing then for the auto industry, taxpayers, and consumers – indeed, just about anybody not working on an auto assembly line — would be to let the car makers file for bankruptcy protection. Then they can be released from the crushing weight of their labor costs to start over in a more competitive position.
Of course, this is not good politics. Well, let’s try a more pragmatic solution then. Allow the bailout but make it conditional on changes that lead to a more competitive industry. In essence, the unions should accept a reduction of their monopoly power in the labor market.
The required adjustments will not easy. So part of the bailout could be allocated to helping workers and retirees adjust to the new realities of the global economy. From the way the economy is going now, it looks like we all will need to tighten our belts. Why should auto workers be exempt?
6 Responses to “ Bailout the car makers? ”
So the governments give foreign automakers billions to build new plants causing an overcapacity in the market and now they say - sorry big 3 - we can’t loan you some money?
By mit on Nov 19, 2008
I have had 3 Toyota’s, kept the first 2 for 7 years, have had the current one 13 years. Cars are lasting longer which means there are fewer cars needed. Why bail-out all companies? Two have stated they can not survive: let them go broke. That will help the third one (Ford) survive and we may end up with a viable car industry. GM had a plant in Fremont, CA, where they could not built cars because of “the workers”. Toyota re-opened the plant and with the same workers builds cars that sell and last.
By gleeden on Dec 4, 2008
American auto industry say they are losing millions of dollars per day.. when it is that they aren’t robbing as much from the masses as they are accustomed to… American cars shouldn’t be 30-grand… they should be 2-grand… They last only five years before things start to fall apart and off them… They aren’t worth 2-grand… They are getting as much for a new car as houses sell for in small cities and large towns… They are part of what’s destroying the economy… All they care about is their damn private executive economy… Their pricing has made it so most people can’t afford a new car in their lifetimes… We get the garbage cars the lucky ones toss-out, after they’ve almost destroyed them… The price of new parts forces us to buy our parts from the car dumps… The car companies have treated us like s— for decades.. Why the h— should the Public’s money be used to treat the car companies like royalty, when the car companies are nothing but … cheapskate parasitic-bullies..?
By DonaldJ on Dec 9, 2008
ENOUGH of THIS !!! if Korea can make cars I’m sure Canada can too.
nevermind General Motors, how about Canada Motors.
First, start with consumer cars and lets just BUILD modern Electric Vehicles \ Alternative Fuel Vehicles, \ … and mass produce them all. !? Jobs ? uhhmm and look at the jobs that would create for potential canadian skilled workers’.
Do we need Americans’ permission? Heck, they might even like having better “alternatives” than what their own BIG 3 have been giving them -as in the same basic gas-guzzling junk since the seventies.
In fact, it may just smartin’ those wet-brained auto-execs up to atleast the point of building “BETTER” vehicles again !!!
All of today’s car makers are just puppets for their “executive” OIL\Energy Companies. -we know that right ?
But handing taxpayers money to bailout a few greedy american auto execs down south ??????????!!!
‘comon’ Canada, wake up !!!
By Rick on Dec 11, 2008
I agree with you completely. The reason why Toyota surpassed GM (8.97M v.s 8.35M)in number of vehicles sold is because they make a better more reliable car! Chrysler makes shitty cars always have always will its so time for them to go bankrupt. Besides last year there were 34M cars that were built but didn’t sell!!! its time to wake up and stop flooding the market with cars nobody wants. Honda Toyota V-W they’re the way of the future. So save tax payers money for green infrastructure plans and let the makers of the ugliest car on the road (pt-cruiser learn an important lesson!
By Alex on Jan 27, 2009
Why a bail-out?
Follow the money.
If governments don’t bail-out the automobile industry - tax revenues will decline and that would be (in their mind) unacceptable.
They don’t give a spit about auto workers or anyone else for that matter. It’s tax reduction and their personal coffers they worry about.
It’s always about the money…
By Rene' on May 29, 2009