Consumer Law

Bail out Detroit? Not without some conditions.

By Sam Glover

While I did not like the idea of bailing out Wall Street, I really do not like the idea of bailing out Detroit. Yes, the auto industry is a cornerstone of the American economy. Yes, the collapse of GM, Ford, and Chrysler will deal a powerful blow to an already-reeling market. Yes, this will suck.

But if subprime lending got way out of control, at least lenders were selling products people--and Congress--wanted. Detroit has not built cars people want to drive in decades. I am not alone in thinking that Detroit carmakers are prime examples of businesses that are failing because they ought to: they make bad products that nobody wants to buy.

Sure, there are exceptions, but, by and large, American cars are pretty awful. The best GM models barely accomplish average reliability according to Consumer Reports. Many GM models are "well below average in reliability." Chrysler is even worse. Only Ford is getting better; Consumer Reports says that, excluding some trucks, "Ford's reliability is now on par with good Japanese automakers."

Consumers agree. Ford has not made a profit since 2005, which has nothing to do with the present economic meltdown. GM lost $269 million during 2007, and Chrysler lost a whopping $1.6 billion last year.

If this really is a case of "too big to fail," then Congress must impose some strict conditions on the auto industry, including higher fuel economy and emissions standards, limits on large trucks and SUVs, and maybe tire pressure monitors as standard equipment, since properly-inflated tires could save an awful lot of fuel. Maybe some quality control targets, as well. After all, cars that break frequently result in wasted spare parts and extra transportation costs to move all those spare parts around.

In short, Congress will need to do more than just keep the Big Three on life support. It will need to force Detroit to start innovating once again, and return to the novel idea of selling products consumers want.

Full post as published by CL&P Blog on November 17, 2008 (boomark / email).