Auto Industry: Ugly Choices

I’m no fan of the US Auto Industry – nor for that matter, of the Wall Street fat cats and bankers we’re been bailing out. But I’m having trouble wrestling with this issue of whether to bail them out with government funds or let them go bankrupt.

But this is one of those “don’t-ask-for-whom-the-bell-tolls” issues because it tolls for all of us. Everything is interconnected – as with Wall Street. That still doesn’t mean a government bail out is the best solution. it simply means that whatever the solution, we need to factor this in. Things just don’t exist in isolation.

Don F. sent me a piece the other day that made a good case for not bailing them out – that nankruptcy court is the better choice. You can read it here.

Today Bob Herbert makes the opposite case in the NYT. For me, the essence of his argument – the part we tend to ignore, is this:

It’s not just General Motors or Chrysler or Ford. The U.S. auto industry is the cornerstone of American manufacturing. It supports millions of jobs, directly or indirectly, in a vast array of businesses.

Start with the thousands of parts in each vehicle. They are produced by suppliers across the country, from one coast to the other. Those supplies have to be manufactured, packaged and transported. Truck drivers, railway systems and shipping companies are involved.

And, of course, there are dealers everywhere. And the auto repair industry. And the insurance industry. And vast systems of advertising supporting every kind of job you can imagine, from messengers to accountants to filmmakers and beyond. All of that advertising funnels absolutely crucial revenues to television, magazines, newspapers — you name it.

If G.M., which is on life support, or Ford or Chrysler were to go bankrupt, the reverberations would kill the jobs of entire armies of American workers. It would undermine the standard of living of hundreds of thousands of families and shutter the entrances of untold numbers of small and intermediate businesses.

I’m in the undecided column on this one – but I wish all of this wasn’t happening during a messy lame duck Congress and a messy lame duck administration with an Obama who should be focusing on building his team for the future, not trying to solve problems now with no team in place.

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One Response

  1. The Detroit bailout just prolongs the inevitable. Investing in these companies with taxpayers’ money at this point is subsidizing failure. Let them attempt to restructure when they enter bankruptcy, or succumb to market forces.

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