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Auto maker bailout is Un-American, but probably necessary
By admin | December 9, 2008
By Richard Allen
As a social studies teacher by trade I have often taught lessons on free enterprise and capitalism. I try to teach my students that in a capitalist society business owners who produce legal products or services, pay their taxes, abide by the law and see to the needs of their workers and customers have the right to succeed. At the same time, however, those same businesses also have the right to fail.
Sometimes, even when meeting all of the requirements above it does not work out. Many businesses started and run by hard working, intelligent people simply don’t make it.
However, the odds of a business failing increase dramatically when they do not meet one or more of the requirements above. And, when that business is not run in an intelligent way its chances of exercising its right to fail are almost a certainty.
The United States Congress appears to be on the verge of passing a $15 billion bailout of the American auto industry.
Under normal circumstances, if I were speaking to my classes, I would say these businesses have been poorly run for years and have indeed exercised their right to fail, and they should be allowed to do so. However, this is not a normal circumstance.
The failure of these companies would hurt far too many people. Too many jobs, both directly and indirectly, would be lost and too many people who had little or nothing to do with the financial mess these companies now find themselves in would be left with no where to turn.
General Motors, Chrysler and Ford have been poorly managed. They have too many redundant components. They have produced big, fuel guzzling, inefficient, overpriced cars for too long. Now, they are reaping what they have sown.
Add to that, the unions have overcharged for their bloated labor force and have gotten away with it for too many years.
For the U.S. government to get in the way of this colossal failure seems to me to be Un-American. It flies in the face of all we have been taught. As Americans we have been told that we will be rewarded for doing things the way they are supposed to be done, but conversely, we will fail when things are done in the wrong way. That is the American way.
The act of the government to bail out these poorly run companies is nothing more than a reward for doing something the wrong way.
The bailout is supported by NASCAR, a company that may be facing some of the very same issues as the auto makers. NASCAR chairman Brian France sent a letter to lobby Congress in favor of the planned aid to Detroit. “I’m writing you as a concerned American who wants what is best for our general country,” France wrote. “Of course, the domestic automobile manufacturers play a very important part of the heritage of NASCAR, but more importantly, it is vital for all of America.”
Needless to say, NASCAR depends on a healthy auto industry and would directly benefit from the bailout through the auto makers support of NASCAR teams and the sanctioning body itself.
At one time, the American auto companies were among the strongest businesses in the world. Somehow, they lost their way. They forgot their purpose and let short sighted vision replace long term planning.
Now, they are reaping what they have sown, but not really. The rules of free enterprise are being set aside. Adam Smith’s economic principles are not being allowed to play out.
As Un-American as it may seem and as many laws of economics as it may violate, it is probably best to rescue these companies, once. Hopefully, they will learn from their mistakes and move forward in a positive way, for all our sakes.
Richard Allen is a member of the National Motorsports Press Association. His weekly column appears in The Mountain Press every Wednesday.
Topics: Articles |
December 10th, 2008 at 2:34 am
As a student of both history and economics and through my own life experience, I have come to learn alot about how the dismal science works. Economics plays no favorites and doesn’t have a conscience either.
That being said, the corrupt influence of special interests in our Congress and Executive Branch have gotten in the way of many well meaning folks who saw these potential problems and worked to head them off at the pass. Many legislators and activist groups have worked for years to force the auto industry to improve their fuel efficiency. A senate filibuster in 1990 stalled the progress that would have been made, preventing 40+ MPG vehicles from being commonplace by now. The corrupt influence of the major oil companies lobbied Detroit to disuade them from making the changes that needed to be made.
Even worse, the stubborn, stupid and selfish Bush administration policies enabled Detroit to continue their shortsightedness.
I agree that these idiots do not deserve to be saved. However, the lives of their employees and health of their vendors must be preserved. With greater government control over them, perhaps the Big 3 might begin to operate again in their own best interests. Yes, you can call this socialism if you want. However, you can go back to the Teddy Roosevelt administration to find examples of when government intervention was necessary to protect big business from itself.
I didn’t even get into the de-industrialization of this country. The fact is, this country doesn’t produce anything anymore. However, I leave that for another post.
December 10th, 2008 at 7:44 am
I own a small business and most of the times would be against a bailout, which is really a loan not a bailout as in freebee!
But when the banks, and AIG insurance got one with little oversight, I got to thinking helping Detroit was not a bad idea! There was a double standard!
When I found out that Sen Shelby who is leading the charge against the loan package, just google as see what his State OF Alabama gave millions in incentives to get MERCEDES to locate in his state!
Governor Sanford in South Carolina is against the loan, his state as well gave millions to bet BMW in his state!
There should be no double standard! These companies were given aid to compete with Detroit!
Farmers have lived on USDA loans or buyouts such as Dairy, Tobacco and other programs government programs for decades!
I know the Detroit auto makers have made mistakes, but some complain like it was the 70,s again that Detroit does not make cars with good fuel mileage, GM today makes 30 cars that get over 30 miles per gallon!
There main issues is they pay aprox double in wages that the aisan companes dont have to pay!
One thing that I think needs to be mention, was when World War 11 was going own, just google sometime how the Detroit Auto Makers started to making aircraft, tanks miltary equipment to helps us win the war! That means something to me!
December 10th, 2008 at 8:15 am
You wrote:
“They have produced big, fuel guzzling, inefficient, overpriced cars for too long. Now, they are reaping what they have sown.”
I cringe everytime I read statements like this in the media. The big three produced those vehicles because that’s what their cutomers wanted. They produced them because they sold well. That’s the most basic way any business stays in business, by producing what your customers want to buy. It takes a minimum of four years to produce a new vehicle from a clean sheet of paper. The credit problems, high fuel prices, and the general economic downturn all came in less than one year. Not nearly enough time to react with a new product more appropriate for the times. The auto industry has some management problems, yes, but producing products that the public doesn’t want isn’t one of them.
“Add to that, the unions have overcharged for their bloated labor force and have gotten away with it for too many years.”
Now you’ve hit on one of the real problems. The UAW has overstayed their welcome. Counting benifits, the labor cost for a UAW employee working in a GM assembly plant, for example, is $74 per hour. The cost of that same worker in a non-union Toyota plant here in the USA is only $49 per hour. Right there is one of the main reasons the big 3 have a hard time competing with the imports. Throw out the UAW contracts, get the US government out of the way with their onerous and uneccessary regulations, and watch the US auto companies soar.
Of course now, with the bailout, the government’s intrusion into business will only be worse. A nationalized auto industry is ulitmately doomed.
December 10th, 2008 at 9:16 am
Rich,
I have to disagree….Congress for years knew the car companies were poorly managed….But, the worst thing about the car companies is government….They tell us we have to wear seats and now some vehicles have 6 air bags which is stupid….There’s not a congressman in any state that knows how an engine runs….That’s why with all these stupid anti-smog parts on the engines built today they can’t breathe and that’s why they can’t get good gas mileage or perform either….Yes, they do need some restrictions but, it got out of hand because of these tree-hugging liberals….Just like gasoline…..The government is the reason it’s so high….Not OPEC……These companies have let the UAW bend them over with these ridiculous wages and benefits for years….Do away with the UAW and i say bail them out…Otherwise let them go under and it will cost me money…Toyota, Nissan, and Honda don’t have the UAW and they have satisfied workers and for the most part build a better product….The UAW has for years lined these jake-legged politicians pockets and that’s why we’re in the shape we’re in….Look at Fannie Mae and Freddie Mace….Barney Frank and Dodd ought to be in Jail….I mean it takes a real idiot to not want to drill your own oil and pay OPEC Billions because of some rodent or bird…..That’s also what’s wrong with Nascar today too much Nascar government…….
December 10th, 2008 at 9:40 am
Actually saving the US manufacturer’s is the major prioroty. About 3 million jobs would be lost between the manufacturers, the suppliers, the dealers and the local economies they are in. Do you think our economy right now could afford this, I think not - because this would be a permanent loss. there are mistakes and blame are to placed in several places.
1) you have financial people running the car companies. All they want is to products which make a profit for the stock holders while foresaking innovation and long term sustainability.
2) the government for not enforcing the CAFE standards; so there is no incentive to offer smaller fuel efficient cars.
I have no problem with a bailout but it should include benchmarks for example:
1) the largest SUV’s should be taken out of production (Suburban, Expedition, Hummer)
2) remove the chairmen and replace them with car people.
3)fuel efficiency standards must be enforced on a time table whether it be hybrids, smaller engines etc.
December 10th, 2008 at 4:05 pm
Chris has knocked his point right out of the park!
Toyota, Nissan and Honda (among other foreign manufacturers) invested in their future. They looked past short term gains and are able to persevere in this financial crises as a result. Our domestic car companies have not done this. Instead, they blame their work force for their lack of competitiveness.
I like to hear these worker bashers crow against paying people living wages. Perhaps, they should look further into the problem, which is the raping of America by the health care industry. The cost of insurance for these workers is the single biggest chunk of the car maker’s labor costs. I suppose these workers shouldn’t be insured. I guess that’s the answer for some of you.
By the way, the tree hugging liberals have been out of power for much of the last 14 years. And, they’ve only held the White House twice in the last 40 years. Time to look at little closer at the real problems instead of blaming the usual suspects.