To Save or Not To Save the Auto Industry

What should we do with the auto industry? On the one hand, they employ millions of people directly and support businesses that employ millions more. Can ourcountry handle the collapse of this industry in these already disastrous economic times?

On the other hand, I can’t really deny that they cars they make aren’t as good as their foreign competitors. They are less attractive, less functional, and have lower gas mileage than their foreign counterparts. They clearly haven’t done a good job of innovating and staying abreast of changes and trends in the market. Other auto companies aren’t suffering the way they are. So why should we help them? What precedent are we setting? What will be the next industry that we’ll have to help? Where does it end?

I also go back to the union issue. I am strong proponent of workers’ rights. However, even I have to admit that the unions have gone too far. Requiring lifetime benefits for someone who has only worked for the company for five years? I’ve never heard of that…ever. It seems unreasonable to me. Yet at the same time, I don’t buy that the only way that American auto manufacturers can compete with their foreign competitors is to cut employee pay and benefits.

What to do, what to do…

How now Uncle Detroit?

Democrats are pushing ahead with a bailout of Detroit’s failing automobile industry. Apparently, they and their suppliers are too big to fail. I don’t want to see all those workers lose their jobs. I don’t want to see all those who invested in a proud, American company lose their money. And, I don’t want to see the American automobile industry dominated by foreign corporations, who play by different rules.

But, I want to see some questions answered before taxpayer money is used to bail them out.

For instance, what happens if the taxpayer investment isn’t enough to turn around this juggernaut? If other investors don’t think these companies are a good bet, then why should the government think any differently? Will the government end up owning all the pieces of a failed enterprise? Will the government join the line of creditors owed money? Are we just putting good money after bad?

But, let’s say that the CEO’s of the Detroit 3 are right and all they need is a little rescue from the government. Is a ‘restructuring’ in the forecast? Because, of course, we all know what a restructuring or downsizing or reorganization is – a laying of off the workforce! So, in effect, you and I would be paying for workers to lose their jobs! Wait. Isn’t that we’re trying avoid in the first place?

What I worry about is that the CEO’s and corporate investors will make the claim that it is the ‘uncompetitiveness’ of the Detroit 3 that must be tackled. More code words. I fear that this means getting rid of comfortable union pay scales, worker pensions, and safe workplace conditions. Forget that it was management miscues that got them into this mess in the first place, and forget that senior management isn’t likely to lose much in the long-term. They still need to cut expenses in order to compete against ‘leaner’ competitors!

Perhaps, then, we should get rid of the senior management? Predictably, GM Chairman and Chief Executive Rick Wagoner has “rejected the idea that he might have to step down as part of a federal rescue.” And, I know, we would have to pay “market rates” in salaries for senior management, even though the companies clearly aren’t being priced by those same “market” forces. So, how much should we pay to run companies that aren’t considered “viable”?

What about dividends? Traditionally, shareholders have expected a return on their investment. Will the government receive dividends too? Or, will government be exempt from benefiting from their influx of capital? Maybe, we’ll just see a siphoning off of government money over into dividends?!

Lastly, I wonder what makes AIG (an insurance company) different from, say, GM or Ford? Why shouldn’t we nationalize the automobile companies? After all, this country still needs cars and trucks, so there should be a way to keep everyone employed, provide a more fuel efficient vehicle, and maintain American leadership in the industry. And, if the current CEO’s can’t do it, then why should we think that government sponsorship would be any worse?