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Saturday, November 08, 2008

Thoughts on another bailout


The papers have nothing but bad news about the condition and future of the Big Three automakers, GM being in the worst shape, bleeding billions of dollars each quarter. Should the US government bail out American automakers like it is AIG and the banks? Having lived in Michigan for many years, I am aware of the fall-out of GM going under. There are so many peripheral businesses that feed into the auto industry that would also dissolve, worsening our already shaky economy.
But unlike the banking industry, do we really need what the big three are making? large, fuel-inefficient cars that are clearly not the future? There is no sustainable future for the big SUV's that clog highways and views from those behind. If they retooled and made vehicles that were small, well-built, long lasting and fuel efficient, there would be an eager market for their products.
I had this argument with a next-door neighbor in Indiana in 1982, when he objected that I bought a Honda Accord instead of a Ford. I was not buying a Honda to be anti-American but to be truly pro-American and free market by purchasing what I believed was the best product that my money could buy.
Is now the time for the auto industry to wake up and woo the US consumer with the news that they really get it?

2 Comments:

At 10:29 AM , Anonymous Anonymous said...

OR the U.S government could use it's leverage to "encourage" the automakers to continue the trend toward producing smaller vehicles. Unfortunately, however, if gas stays cheap for any length of time, Americans will gravitate towards larger cars again.

 
At 12:52 PM , Anonymous T said...

The idea of fuel efficiency has been around for decades, and Americans have typically purchased foreign brands because they could not get a comparable vehicle from a domestic manufacturer. Not only that, but models produced by Japanese manufacturers are more reliable and less expensive to maintain.

It may seem ruthless, but I am not interested in spending my money (i.e.: tax dollars) to help companies that have not paid attention for years. They got themselves into this crisis and it's time to let capitalism work that way it is supposed to work - which is to destroy the obsolete and shift resources to the survivors.

In terms of job loss and impact on suppliers, yes, this will happen. But for every GM car that is not sold, there will be another sold by another manufacturer. The jobs and sales of components will simply flow elsewhere, not disappear completely. And let's not forget that bankruptcy of automobile manufacturers is not a new thing. Does anyone remember the Studebaker, Desoto, or Hudson?

Failure, while it doesn't feel good, is part of our system. Prolonging the process does not help anyone, at least in the long run.

 

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