Bail Out the Big Three
The U.S. government should save its ailing automobile giants: Ford, GM, and Chrysler. Pro or con?
Pro: Give Strategic Aid
The U.S. would do well to lend the Detroit Three automakers the money they need to get over the recessionary hump and avoid Chapter 11.
I don’t suggest handing them $15 billion, $50 billion, or $100 billion without strings. Management and labor should put a series of new sacrifices on the table first: Eliminate perks for managers; limit executive compensation; make retirees pay more for health care; give top-tier labor wages comparable to those at Japanese transplant factories. And make debt holders who gambled on the auto companies take a write down.
People on the coasts and Washington are fond of bashing Detroit. But here are some facts:
While GM (GM), Ford (F), and Chrysler haven’t made real money in years, they have been restructuring to get their costs in line with their declining market share. The credit crunch drove what was an orderly restructuring off the road.
And GM, Ford, and their dealers have been around for 100 years, pouring a lot into our civilization and communities. Their longevity means they have legacy costs Toyota (TM) and Honda (HMC) do not have in the U.S. Compare their vehicles with Honda and Toyota counterparts, and you’ll find they tie or beat their rivals in fuel economy. True, Detroit built too many SUVs, but they had buyers until recently. Finally, lack of a U.S. national energy policy has denied Detroit a predictive market for smaller vehicles.
Use Chapter 11 to throw workers and retirees onto the rolls of the uninsured—when we have no national health-care policy as European and Asian countries do? Persecuting Detroit or the UAW for fighting for health-care coverage in that policy vacuum seems immoral.
And could we really expect to call the U.S. a world economic power without a homegrown auto industry?
Con: Don’t Fund Failure
A Big Three bailout would reward bad management and the intransigent labor unions that were chronically at one another’s throats. What kind of message would it send to the likes of Toyota and Honda, which have been far more nimble? The Japanese automakers:
1) long ago invested time and expense into hybrid development
2) responded to “Buy American” and changing workforce conditions by employing thousands of U.S. autoworkers in places such as Mississippi and Ohio
3) never asked our government or Tokyo for a bailout, even as they are suffering wrenching U.S. sales declines this very instant.
This should be Toyota’s and Honda’s chance to reap the rewards of decades of discipline.
Even when the U.S. economy was booming—say, back in 1999 or 2006—the Big Three were hardly hitting the ball out of the yard. They were similarly flat-footed in the early and late 1980s. See the Michael Moore documentary Roger & Me. There is just no guarantee to the taxpayer that the Big Three (rather 2½, counting Chrysler) will get religion this time around.
If the U.S. cannot get carmaking right in good times and in bad, it needs to learn to get out of its own way. Companies such as Toyota and Honda—and their scores of U.S. workers—have shown themselves more than ready to step up to the opportunity.