A friend of mine on Facebook asked a very good question: "As a primary care physician in the Detroit area, what do you think of the auto bail out?"
Of course, on the one hand, if we are to believe what the auto executives and the media tell us, then we are to believe that if the domestic auto industry crumbles, so too will the fabric of our republic. The auto industry affects so many jobs in so many other industries, that our entire economy could suffer -- but most of all, in Detroit.
On the other hand, if one company (or at worst, three companies) declare bankruptcy, could this REALLY destroy the entire economy? Is our whole country really that dependent on this one industry? Should these companies even be ALLOWED to exist if they have that much power over the entire economy? Isn't that more like a monopoly, or at least a cartel?
The bottom line is that I believe in competition and free markets, and I do NOT believe some companies should have to compete more than others. We can debate forever about what caused the auto industry to collapse. Is it simply that they can't build competitive and attractive cars? Is it that the unions have too much power and have forced the companies to pay too much and for too long for so many employees who don't even work there anymore? Or is it simply that the Japanese and German manufacturers can build a better mousetrap? Whatever the case is, it simply is NOT FAIR that certain companies get bailed out, while others (such as small businesses, like my own) would be left to die a painful death.
If GM can't survive any longer, then I believe it is time for evolution to do it's thing and let the strong survive. If GM declared bankruptcy, it would be devastating, especially where I live. But that doesn't make it RIGHT for them to be getting a bailout from the taxpayers. If they went bankrupt now, they would have to reorganize, get rid of the old union contracts, start over and make some more competitive vehicles. Instead, they are basically running business as usual with the same crappy cars (except maybe the Corvette -- which has always rocked) and still negotiating with unions. Free markets would FORCE GM (and the others) to be competitive. Otherwise, I say let Toyota, Honda and Volkswagen move in and take over the US markets.
Sorry, Cindy (my Facebook friend who asked the question), but I'm not that hypocritical. Just because I'm from Detroit, it doesn't mean I abandon my principles when I know I'm right. I believe that my family and I would figure something out, and those who could not should get out of Dodge. One of the beautiful things about the United States is that there are 50 of them. If you don't like Michigan, move somewhere else!
This is a tough one for me David since I tend to be a on creative destruction side. That said, the 'US 3' had made a lot of progress towards quality and cost over the last 10-15 yrs. Quality has been almost equal, and in some brands, superior to foreign cars. Progress on the cost end has been enormous as well, GM alone taking billions out of the structural cost of the business.
ReplyDeleteNow, if you go back in time about a year and reset things to a 'normal' recession, the 'US 3' and in fact all the car companies, would have seen a dip in sales, but not the 20-30-50% drop from the prior year. That was only caused by the credit market freezing up.
And we all know what caused that.
And we know that the banking/credit market has received upwards of $1 trillion.
And the auto companies (so far) have received about $30 billion.
I'd rather bail the US 3 out, who employ far more people, than continue to bail out AIG (and whoever in the world is getting our money has its funneled through AIG - that's the bigger scandel).
Do I personally believe GM should take the bankruptcy route? Yes, and I would pledge to buy a GM vehicle so Mr. Wagner doesn't have to worry about people not buying.
I agree with all of your sentiments, Kevin, especially that I'd rather see the US 3 get bailed out over AIG and Wall Street. HOWEVER, I would prefer to live in a country where the government stayed OUT of our business and let failing businesses go the way of the dodo bird. Things will suck for the short term, but we'd all be better off in the end. Instead, we are left with TRILLIONS of dollars added to our national debt, and no real gain in terms of where these businesses are today.
ReplyDeleteI'd rather see the government give those trillions of dollars directly to the TAXPAYERS (i.e., us), and let us spend the money to stimulate the economy and save ourselves from economic collapse. To give it to CORPORATIONS, you're left with executives taking multi-million dollar golden parachutes and lots of that money going into foreign banks.
I would agree, any bail out creates the understanding that you can take risks w/o proper mitigation and the government will be there if you screw up. If you know the government won't bail you out, folks at AIG, Fannie Mae/Mac et al., wouldn't have taken the risks.
ReplyDeleteI'd rather the government not take the trillions in the first place!
I watched the clip with Mr. Freidman - we could use him now.