Bailing Out the Auto Industry
When an auto firm makes a product inferior to its competitors, signs labor contracts it cannot afford, and focuses its fleet on gas guzzling SUVs at a time of rising gas prices and increased environmental awareness, do you know what that firm and its shareholders deserve? Bankruptcy! At the very least, the American taxpayer shouldn’t be asked to bailout firm executives who managed their business poorly, shareholders who allowed them to do so, and a workforce represented by a union that pushed for an obviously unsustainable labor contract.
I agree with this wholeheartedly. The bankruptcy courts can handle this kind of thing. The only possible use of taxpayer dollars that might be justified here is to help out pensioners who are impacted by the auto industry’s mismanagement. I don’t see much of a case for doing much else. Bailing out an industry that, in all likelihood can’t pay off its loans is likely to lead, as Michael O’Hare notes, to a government-run car company.
But these companies have amply demonstrated that their management is pretty good at making twentieth century cars in a protected environment, but profoundly suck at everything since except, well, sucking up taxpayer money and destroying value. Why in the world would one prop up such an enterprise; if it’s a loan, why would one expect it to ever be paid back? We will wind up with a nationalized car manufacturer, and if you like Alitalia, you’ll love US National Motors, a basket case for the ages.
That’s about right.