Monday, November 17, 2008

Bailing out the behemoths

As someone who has been driving small, fuel-efficient foreign cars since the late 60s, I don't have much respect for the people at the top of the US auto industry. People who as recently as last year were lobbying against fuel economy standards that my '68 Saab and '63 VW had already achieved. People who once stated that "Americans will never drive front wheel drive cars." People who built big fat gas guzzlers and assured us all that "that's what America wants" while at least 5 Asian car makers got rich making small and efficient cars for the same market.

Until proven with solid numbers, I flatly refuse to believe the received wisdom of the US auto trade press that American car companies can't compete because US labor costs are so much higher than they are everywhere else. This is pretty hard to swallow -- first, because, for at least a decade, Japan and Europe have had higher standards of living than the USA. Second, because the US has one of the least effective union movements in the world. And third, because the Japanese at least seem to be able to make excellent automobiles either in Japan or here in the USA and they seem to be able to make money at it.

The undending nonsense that issues from mouthpieces for the big-3 (as they have been called, but maybe not much longer) does not lend credence to their claims that the economy -- and not their management -- are responsible for their plight. For instance, recently, during a PBS interview, a GM spokesperson said they hadn't invested in hybrids because they didn't feel it would have been a good business decision. The PBS interviwer pointed out that Toyota was "eating your lunch" with their Prius hybrid, an observation that provoked only a sullen expression from the spokesperson.

I think Michael Moore's excellent film, Roger and ME, captured the arrogance that underlies decision-making at GM, if not at other US auto makers.

However -- and this is a big however -- the big three are a major source of employment for Americans and of tax revenue for entire regions of the country. Punishing those people for the sins of corporate automotive leaders is unfair and economically worse than unwise.

Certainly if giving money with no strings attached to the likes of CitiGroup is OK as government policy, then it ought to be OK to give it to the arguably more strategic auto industry.

It is not clear whether bankruptcy and reorganization mightn't be a better option for the big three than a simple taxpayer handout, but, if the handout were actually given with appropriate controls -- unlike what is being done with Wall Street -- there might be some possibility of a salubrious outcome.

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