Auto Bailout a Go. Oh No.

It’s finally happened. The Government’s going to bail out GM and Chrysler. 17.4 billion dollars in “low-interest loans” to help get the automakers back on their feet.

In my opinion, this is a very bad move. The automakers’ problems are not, as the CEOs have repeatedly claimed, as a result of the current financial crisis. Nope, their problems go way, way back to the early 1970s.

Back when gas prices started skyrocketing (the first time), the market suddenly turned from the big, powerful cars Detroit was pumping out and started looking at smaller, fuel-efficent cars like the ones Japan had just begun importing. Detroit put out fuel-efficient cars too, but unlike the Japanese, theirs were cheap, underpowered econoboxes. That trend lasted into the 90’s when the gas glut caused the market for puckups and SUVs to take off. Then, when Hurricane Katrina hit and gas prices started to skyrocket again, buyers started to turn away from their big trucks towards hybrids. But Detroit kept on pushing the big, gas-guzzling trucks and then wondered why they wouldn’t sell.

Another problem is the UAW. I think unions have their place, but they’re not trying to secure safe work environments or revieve fair pay: OSHA and federal laws take care of that now. What the UAW has done is, quite literally, castrate the auto industry. The lowest-paid UAW workers, the ones who sweep the factory floors, make the equivalent of $70 an hour once you factor in retirement and benefits. (Auto workers at places like Nissan and Toyota, for comparison, make the equivalent of around $45.) And during negotiations during the crisis, the UAW leaders refused to accept a pay cut or reduction in benefits, even though the Big Three looked like they were about to go under. Never mind the fact that if the companies folded, the UAW’s members would be out of work. What’s that old saying, “Part of something is better than all of nothing?”

Honestly, IMHO, all the bailout is going to do is just prolong the inevitable collapse of the American auto industry because the automakers, in all likelyhood, will not change their ways despite the governments requirement to do so. Bankruptcy, on the other hand, would make such neccesary changes inevitable.

There was a editorial on the subject a few weeks ago in my college’s newspaper. You can read that here.

Status Update:
Without Remorse: pg 84 out of 750.
Justice Delayed: 9 pages, 5,403 words.

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One thought on “Auto Bailout a Go. Oh No.

  1. I don’t know what to think about the bailout. It seems like if a company is failing the government should let it fail, though I am obviously something of a lassiez fair economic supporter.

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