Whether to bail out auto companies

American automakers seem to be begging for financial assistance from the federal government. Given the large number of people involved in the automobile industry, it's understandable that many people want to bail them out from possible bankruptcies. I have a different opinion. Given their historical performance in recent decades and their reluctance to change anything, I think they should weather the economic downturn on their own.

Unless they can put forward a viable and concrete plan to change their fortunes without outsourcing everything, putting up dozens of billions of dollars worth of loans may be throwing good money after bad. Unfortunately, the leaders of these companies have mostly focused on threats about what would happen if they went bankrupt, rather than outline changes in long-term policies and priorities that would change their fortune. A lot of people are afraid that the companies might go under, but it looks like they've been consistently self-destructing, anyways. It might be a lot better to put the money into infrastructure investments that will pay off economically instead of wasting it on drowning companies that would go bankrupt whatever we do.

It's a good sign that Democrats are now starting to think the same way, although I think they're still giving the auto industry too much benefit of the doubt with the way they're so eager to help the companies. However, I'm not sure it's a good sign that I'm actually agreeing with the Bush administration on this issue ...

4 Replies to “Whether to bail out auto companies”

  1. This is where my conservatism shows as well. I am going to be so annoyed if they are bailed out. They blew it ... they ran their business into the ground. etc... This is MY knee jerk reaction. It's the same feeling I had with the Wall St. bail out.

    However, I am not an economist - I have no way of knowing what the unemployment ( etc...) will do to our economy. I wish I were smart enough on this issue to have an educated opinion - but I do not. It just doesn't smell right to me.

    It just really "ticks me off" when I think about the EV1. They had a functioning electric vehicle and threw it away. How can we trust them? Aaack - I am ranting --- must go vent!!

  2. Given the auto companies track record, I would find their bailout even more onerous than the $700 billion bailout bill. At least the financial institutions don't have the auto industry's consistently bad track record, it's just the magnitude of the bailout that unsettles me.

    But for the automakers, no one seems to be explaining why a drastic increase in unemployment wouldn't happen anyways even if they're bailed out. Maybe the automakers have some obscure but viable plan to switch things around that the media is not reporting, but right now it feels like a $25 billion bailout would just be money thrown away, when it could be used to invest in brand new automakers that aren't so ossified ...

  3. Stacy, one in 10 people are employed in a job related to the auto industry. Unemployment is already through the roof right now and losing millions of jobs next year would mean even more stores going out of business, state and local governments losing more tax revenue and not being able to provide services. Right now everyone has to get money from the federal government just to keep running. The financial system the economy depends on is broken right now. We need to do everything we can to stop the bleeding.

  4. My own concern is that even with a bailout, all the auto industry jobs could still be lost anyways, just delayed a few months. I'd be less concerned if the automobile company executives explained what they would change, instead of threatening what would happen if the companies failed. It sounds too much like what's going to happen anyways.

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