Obama is pushing for a $50 billion dollar bailout for the auto industry. I’m ambivalent.
On one hand, the auto industry is huge and hurting. If one or more of the big automakers failed, the whole country would be in significantly more pain than it is currently in. Additionally, the skilled laborers are already there, looking for jobs—and a turn around in Detroit would do wonders for the entire region. Similarly, it’s probably a good idea to keep our manufacturing base intact so we can have a diverse economy.
On the other hand, the auto industry is stupid. It has been focusing on larger and larger trucks and SUVs—apparently unaware that gas prices were likely to go up. Did a spike in gas prices surprise anybody? Or, rather, anybody who doesn’t live in Detroit? The Prius has been selling incredibly well. It’s not a particularly new car. But it still has no American competition. Apparently, somebody in Detroit looked at the huge profit margins from huge cars and decided that they should focus exclusively on the gas guzzlers. What could possibly go wrong? With incompetent leadership like this, we would just be wasting $50 billion.
So I would look for a compromise. I would make the money available to the auto industry with a few catches. First, I would increase fuel efficiency standards. We should do that anyway. Secondly, I would require that it be used for very specific re-tooling projects that would also serve the national interest. For example, I would want Detroit to try to compete in the small car market, even if it is less profitable per unit than the truck market. If they can still turn a profit, the $50 billion could help them make up the difference on volume. At the same time, it would create quite a few relatively stable jobs—which could expand the tax base. Thirdly, and probably most controversially, I would seriously consider what can be done about the leadership in Detroit. Apparently to make it to any serious level in the industry, you’ve got to be insane. Perhaps that $50 billion could purchase sufficient stock to get somebody on the board of directors who isn’t a nutcase and who explicitly looks out for public interest. Normally, I don’t consider the government to be particularly competent—but relative to the leadership of the auto industry, they look good.
