Why the Auto Bailout Would Be a Big Mistake

Protecting the "Crown Jewel"

Of course the Big Three's management have made mistakes too. They built cars that people didn't want. They were slow to innovate. Honda's advanced technology lets their plants nimbly switch from one product to another based on consumer demand. And Honda's never owned any private jets.

Detroit's CEO's wouldn't agree to an interview, but Michigan's Attorney General was eager to say that Detroit should get our money.

"It's the crown jewel that we need to protect," Mike Cox said during our interview.

But the UAW workers get paid above the American average, I countered. A bailout is Robin Hood in reverse. It's taking from everyone and giving money to people who earn above average.

"Unfortunately no one ever made that same argument when we gave $700 billion to Wall Street and people living in Manhattan," Cox replied. "We're talking about 2.4 million jobs lost over 27 different states."

The idea that jobs will be lost if automakers go bankrupt has been a popular refrain in Congress.

"Tens if not hundreds of thousands of jobs would be lost in the auto industry itself," said U.S. Sen. Christopher Dodd, D-Conn.

But wait a second, those jobs wouldn't necessarily be lost. Bankruptcy isn't death. Kmart didn't disappear when it went bankrupt. Neither did Fruit of the Loom, Texaco, Continental Airlines, Delta, or United.

They were reorganized into more efficient, sustainable businesses. Out of this creative destruction new jobs emerged.

Assets Flow Where They're Needed

If Congress bails out the Big Three now, they won't get any better, and they'll be back next year, and the year after, and forever after that.

Some in Congress worry about that.

"My fear is that you're gonna take this money and continue the same stupid decisions you've made for 25 years," Rep. Michael Capuano, D-Mass., said.

On Friday Congressional Democrats and the White House neared agreement on about $15 billion in bailout loans for the Big Three. The money would probably come from the $25 billion loan intended to develop high-tech fuel-efficient cars. Congress may vote on giving the Big Three the cash next week.

Give me a break.

-- This embed didnt make it to copy for story id = 6402552. -- This embed didnt make it to copy for story id = 6402552. -- This embed didnt make it to copy for story id = 6402552. -- This embed didnt make it to copy for story id = 6402552. -- This embed didnt make it to copy for story id = 6402552. -- This embed didnt make it to copy for story id = 6402552. -- This embed didnt make it to copy for story id = 6402552. -- This embed didnt make it to copy for story id = 6402552. -- This embed didnt make it to copy for story id = 6402552. -- This embed didnt make it to copy for story id = 6402552.
Page
  • 1
  • |
  • 2
Join the Discussion
You are using an outdated version of Internet Explorer. Please click here to upgrade your browser in order to comment.
blog comments powered by Disqus
 
You Might Also Like...