Friday, December 05, 2008

The Fall Of Detroit

I'm coming around to the idea that our bailout money could be put to better use than propping up the American Auto Industry. It's time to admit it: foreigners are better at designing and building cars than we are. I have no doubt that some Americans will be able to turn that around, but not the Americans who run GM and Ford. Letting those juggernauts grind to a halt is a free-market solution whose time has come.

The money they're asking for would be best applied to extending unemployment benefits to the auto workers. Obviously they're going to take a huge hit too (the union wages were artificially high for largely unskilled work) but if the industry goes down, it will be a while before those people can find other jobs, and that's a long dead zone in an economy that is driven by consumer spending.

Another benefit to allowing this collapse is it will hurt the oil industry. The Automakers have been very, very sympathetic to the idea that cars should use as much gasoline as possible. This really hurt them this last summer. Even American hybrids get about 20 MPG less than their European counterparts. It's a simple software fix involving when the gas engine kicks in; but if you alter the software you void the warranty. Foreign auto makers don't seem quite so accommodating.

Charles E. Wilson, former GM President and Secretary of Defense under Eisenhower, famously suggested "...(What's) good for the country is good for General Motors and vice versa." It may have been true then, but it ain't now. GM is trying to suck the life out of us. And we recognize it. Enjoy the drive home, auto executives!

1 comment:

Publius said...

I think it is a bad 70's holdover that Americans don't make good cars. After all, in other nations, US car makes are very popular and profitable. Further, on the scale of repair schedules and longevity, US cars rank pretty good.

The cars are just fine. Its the business model and the union chokehold that is the problem.