BKs, bailouts, mergers, oh my!
Detroit’s Big 3 would do better building cars people really want
By Jennifer Hadley 11/06/2008
Sigh. Another day, another dollar spent on bailouts. This week, all eyes have turned to the auto industry, where once again huge corporations experiencing declining sales (read: declining revenue) and facing massive layoffs are looking for a lending hand from the government. And yes, White House Press Secretary Dana Perino has confirmed that the government is seriously considering bailing out GM, Ford and Chrysler, which are all struggling as sales for the Big 3 have fallen roughly 20 percent compared to last year.
Whether that bailout money comes from part of the $700 billion bank bailout, from a previously approved $25 billion loan from the Energy Department to make more fuel-efficient cars or from an entirely new rescue plan altogether appears at this point to be anybody’s guess.
But I’m willing to bet the farm that we bail them out.
We’ve already set the precedent with AIG (special shout-out to all who enjoyed the half-million-dollar spa and golf excursion, after we loaned you $85 billion). And we’re bailing out banks left and right who made crappy home loans because they didn’t conduct due diligence in confirming that borrowers would be able to repay them. So, it’s only natural that we’d bail out the auto industry too, right? I mean, why stop now?
Chrysler and GM have been rumored to be in merger talks to cut costs (read: jobs), but a merger seems highly unlikely without government help. Plus, since GM declared in early October that bankruptcy was not an option being considered, that is effectively off the table. With both companies already slashing their workforces and preparing to cut more jobs in coming months, things aren’t looking up for the American automotive industry.
But really, do two wrongs make a right? Does a decline in demand from American consumers for these products automatically justify a government bailout?
Isn’t capitalism based on the law of supply and demand? Why on earth would we bail out or support the merger of two companies that make products that people are not buying?
My guess? We’ll bail them out for the “greater good.” Thanks to my totally useful degree in philosophy, I’m convinced that our government is now operating on a utilitarianism platform, whereby we are choosing actions which will be of the greatest good to the greatest number of people. John Stuart Mill, one of my favorite philosophers of all time, subscribed to this belief, as do I, generally. But how far do we take it?
Of course I don’t want to see thousands of people lose their jobs (while those in the upper echelon of corporations collect paychecks larger than I’ll ever see). Of course I don’t want to see cities like Detroit have their unemployment rates skyrocket. Of course I don’t want to see the collapse of the American automobile industry.
But for crying out loud, when do we admit that American consumers — not the US government — actually dictates which companies survive?
I believe that had US automakers followed the lead of Asian automakers in manufacturing quality hybrid cars over the last few years, the US auto industry wouldn’t be looking for a bailout. But alas, it appears that they didn’t, and by most accounts Toyota is now set to become the world’s largest automaker for the first time, thanks in part to the astounding success of the Prius.
While the apathetic side of my brain says, “Oh heck, just give them the money, we’re giving it to everyone else,” the more pragmatic side says, “Money for what? For products people don’t want to buy?”
Contact Jennifer Hadley at jmhadley624@yahoo.com.
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