Sunday, November 16, 2008

The Auto Bailout

Cato unsurprisingly says "No!" and "Hell no!"

The UAW, Detroit, the Big Three, and of course Obama say "Yes" and whimper, whimper "please".

This article in The WSJ on how GM is trying to set the terms of the bailout really blew me away. Yes, it's a good negotiating strategy to ask for the moon, simply hoping for a pebble or two, but I was hoping for a bit more humility.

There aren't any good answers. Encourage moral hazard by bailing out an industry that will only need another bailout if the economy doesn't turn around quickly or watch millions of real people lose their jobs. I have the feeling that the public will only accept a bailout where the terms are so in favor of the government (similar to the first AIG bailout) that it'd be tempting for the car makers to just declare Chapter 11 (followed quickly by Chapter 7). Or Obama could just do whatever he wants to do and everyone will love it.

3 comments:

media boy said...

In the case of the auto-makers' bailout, it's a relief to have a national issue that is so straightforward: American cars tend to break down and fall apart therefore people are not buying them. If GM and Ford don't want to go out of business, they should start making decent cars. To bail them out would be to reward their terrible manufacturing standards.

PassTheChips said...

Easy enough to say (and I've said it), but much harder to actually do when you're talking about millions of potential jobs. Even if Toyota, Honda, etc come in and employ 50% of the millions of unemployed U.S. auto workers (and suppliers), it'll take years to implement.

I think I'm leaning towards a bailout with lots of restructuring and oversight strings attached.

Seriously said...

I had a Chevrolet Cavalier for 7 years, the only problems it ever had were 1 dead battery and a fuel injector problem that was covered under warranty. The A/C was far superior to my Honda Civic! It also was a smoother ride than the Civic. It weathered my husbands 2 fender benders better than the Civic. Hmm, maybe all American cars aren't inferior, or I hit the Cavalier jackpot!