Why Not Bail Out GM?
Megan McArdle argues that those saying we should bail out General Motors and save its workers just like we did the banks and insurance companies miss the point of the bailout. Whereas a collapse of the financial sector had the ability to take down the rest of the economy with it, that’s just not true in manufacturing.
Besides that, propping up the likes of Citibank will likely actually result in saving Citibank. Not so much GM:
GM’s operations are not otherwise sound. They have been headed for this moment since 1973. Conservatives blame legacy costs, and liberals blame management. They’re both right. GM’s legacy costs are crazy. So is the UAW leadership, which, goaded by the retirees, is knowingly driving the company into bankruptcy rather than negotiate clearly unsustainable deals. Those legacy costs would probably not be supportable by any company in a competitive environment; the UAW’s expectations were created in an era of comfortable oligopoly, when all costs could be directly passed on to the consumer. And the poor quality control on American cars is, from all reports, the responsibility of the union, which maintains downright silly work rules that not even the most ardent liberal could defend in both the Big Three and their various parts suppliers. My favorite was the supplier plant that was forced to work in english measurement even though they had to sell parts in metric. But the examples are legion.
But too, management doesn’t seem to be trying much harder to keep themselves out of bankruptcy court. The company could have limped on for longer if it had, y’know, made cars anyone wanted to buy. That’s not the UAW’s fault. GM’s management seems to have a positive genius for making horrible cars, as if they’d deliberately sat down and asked themselves how they could best combine ugly, inconvenient, and unreliable into one expensive package.
Aside from trucks, in which Ford, Chevy, and GMC continue to be the market leaders, and a handful of niche vehicles (the Corvette, for example) that’s right.
Beyond that, it’s worth noting that the American automobile industry is doing just fine — just not Ford, Chrysler, and GM. My wife drives an Acura made in Maryville, Ohio. My parents both drive Nissans made in Smyrna, Tennessee. My own Nissan and my mother-in-law’s Toyota were made in Japan but both of those badges have huge assembly operations in the United States.
Detroit’s heyday is past but Americans in Alabama, Tennessee, South Carolina, Missouri, and Ohio are making plenty of cars Americans want to buy.