Wednesday, November 19, 2008

11-19-08: Bailing Out Detroit

There's been a lot of talk this week regarding the idea of using part of that $700 billion from the TARP to bail out the Big Three auto makers in Detroit (Chrysler, GM, and Ford). A lot of people are saying it's necessary to do it, but a whole lot more seem to think it's not important.

I fall into a different category: I don't think it should happen out of principle. Bailing out the auto industry is basically saying "We know you're big. We know you've screwed up. But... we forgive you." Letting them go bankrupt is the right thing to do in this case. Why? Because they need to change, and they won't change unless they are forced to. If they had used better business sense (and didn't pay their workers way more than their competitors), they wouldn't be in this mess.

You shouldn't reward a failed system by giving it a second chance by spending tax-payer dollars. A lot of industries have come and gone over the years, and to say the American auto industry needs to drastically change its business model to survive and thrive is no stretch. To say millions of people will lose their jobs overnight is also way too dramatic; bankruptcy would work in stages. It would be a softer landing than many fear.

You have to draw a line somewhere, and this seems to be a good place to start. Sorry, Detroit. First the Tigers, now this?!

1 comment:

Jason said...

For those GM employees concerned about their retirements don't fret the Pension Benefit Guaranty Corporation (PBGC) protects the retirement incomes of nearly 44 million American workers including those at GM.

The only problem is that the taxpayer is the Pension Benefit Guaranty Corporation. Keep GM and its employees working or pay for their retirements.