American auto-makers shouldn’t get a free ride

Those who feared a precedent from the recent financial sector bailout can now say they told us so.

Detroit automakers, specifically GM, Ford and Chrysler are asking for some $25 billion to keep them from going bankrupt within the next six months.

They might fail without the money, but that doesn’t mean we should give it to them.
The problems with America’s auto industry are not rooted in the financial crisis, although the recent recession has certainly exacerbated them. No, these companies have run themselves into the ground through their refusal to innovate.

Overbearing union contracts and government guarantees have made the big three bloated and inefficient. They have been shedding jobs for a long time, in both good times and bad, even while foreign competitors were expanding all over the United States
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In fact, the new auto manufacturing facilities that have popped up in Indiana have not come from Detroit but rather the foreign-based Toyota and Honda.

Detroit automakers have no new business plan that could comfort us into believing they won’t come back asking for more money. Sadly, in this circumstance, the best solution is the Machiavellian one – let them die.

There’s been a lot of rhetoric in the media recently, primarily in defense of American carmakers. Even President-elect Barack Obama has, disappointingly, committed to the bailout idea.

For many, the auto industry has been, if not the staple of our economy, the mental representation of it. Cars are as American as baseball. If CNN anchor Lou Dobbs wasn’t out self-indulgently crusading for the middle-class worker like some modern day Citizen Kane, perhaps he’d appreciate what his Harvard economics degree would have taught him: People respond to incentives.

Yes, rich white men running investment banks, who largely caused the problem, were bailed out, but that doesn’t entitle every failing industry to the same thing.

If the government needs to help create jobs in these troubled times, they should focus on tax and infrastructure incentives that will provide opportunities to the best car manufacturers, even if they are not American-based.

The big three must accept the consequences of their poor business decisions. Only then are they likely to change them.

Dissent:

The automotive industry deserves a bailout, just as much as the financial companies that recently received a $700 billion bailout.

Currently, industries are experiencing financial woes as the global economy slips further and further into insolvency. Last September, the House of Representatives approved a $25 billion bailout for GM, Ford and Chrysler.

It’s time to revisit the bailout and hand over more cash to the industry. If the U.S. does not bail out these bleeding companies, they will likely be forced to declare bankruptcy. In this case, the companies file for bankruptcy, and the United States and the American taxpayer will never be compensated for the last bailout.

If the government pumps more cash into these companies, it could also regulate future cars. Speaker of the House Nancy Pelosi already said she plans to attach fuel efficiency standards to any auto industry bailout.

This is our chance to finally force the companies to go green. Let’s embrace it.

Yahya Chaudhry