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A Bailout for Detroit?

The lame duck Congress is currently considering whether to give automakers some of the bailout money - to the tune of ten billion dollars. Intense lobbying efforts are underway right now, with Detroit desperately trying to convince Congress that this bailout money is all it needs in order to become a viable business model again.

You didn't really believe your ex when s/he told you that this loan was the last one, I swear, and then s/he'd never need to hit you up for money again. It was just that s/he was having trouble making the rent this month, but s/he promised, this was it, this was the last time.

Why, then, should we believe the automakers? Chances are, if the government hands them ten billion dollars, very little will change. Because the problem with Detroit isn't so much the economic crisis (although that has certainly exacerbated matters) but decades of poor management and uniformed decisionmaking. While European and Japanese automakers focused on developing smaller cars with better gas milage, Detroit went in for the gaz-guzzling monstrosity formerly known as the SUV.

It seems that the primary reason for the bailout is to protect the jobs of all the mid- and low-level employees - the guys who work on the assembly lines putting together the cars. If so, we're doing them a disservice by turning this into a lingering death. What happens in two or three years, when gas prices go up again, and Detroit is still basing its profits on fuel inefficient cars?

I don't know enough about Chapter 11 bankruptcy to discuss it in any detail, but it seems to me that if Detroit is going to fall, we should use the existing mechanisms in place to cushion that, rather than pouring ten billion dollars into an industry that's no longer viable.

Full post as published by Nuts & Boalts on November 18, 2008 (boomark / email).