Lining Up on Both Sides of Auto Bailout

Includes: F, GM
by: Paul Kedrosky

People are neatly lining up on either side of this auto industry bailout subject, but most of them are ducking the core issues. If you’re pro or you’re con, here are some of the questions you have to answer to be credible.

  • Pro. If you’re in favor of a bailout, you need to explain how the buck – literally – stops here. Why will capping salaries, for example, change diddly with respect to the U.S. auto companies’ competitiveness? Or are you merely arguing that this was a perfect storm – economic downturn, super-spike in oil, etc. – and so we should bail the auto companies out? (In which case, what about the airlines? Oh wait, they haven’t all failed yet – so much for that argument.)
  • Con. If you’re in favor of letting the auto companies go bankrupt, you need to explain why we’ll be right this time about the systemic consequences when we have been wrong most of the way to this point about every other company, especially Lehman. There is no doubt that the auto companies need to be restructured, consolidated, and generally folded, spindled, and mutilated, but do we know enough about the implications to let it happen during the worst downturn since the Depression?

GM, for its part, isn’t taking this lying down. It has posted a video on YouTube explaining – okay, propagandizing – the implications of letting it die. Watch it to see how the straight-to-consumer “Save us!” game is played.