Blogs & Comment

Bailout the car makers?

It’s abull market in bailouts.The banks werefirst. Now itsthe 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 its mostly been about politics, hasnt 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, its 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, lets 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 shouldaccept a reduction of their monopoly power in the labor market.
The requiredadjustments 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?