No Detroit Bailout
Detroit can't compete with Alabama, let alone China, Matt Kibbe writes
In 1985, 3,200,000 vehicles were made in Michigan, compared with 2,400,000 today—a loss of 800,000 units. In 1987, the first car rolled off the assembly line in Alabama. Today, 750,000 cars are made in Alabama, almost completely offsetting losses in Michigan.
The story was slightly different in Ohio, where 1,900,000 cars were built in 1985. Auto production dropped slightly, to 1,800,000 vehicles in 2007. But while the Big Three dramatically shed jobs across the Buckeye State , Honda set a record in 2007 by producing 700,000 vehicles in Ohio. GM, Ford, and Chrysler are all shedding jobs at UAW facilities in Dayton, Cleveland, and Toledo, but non union Honda factories in rural Ohio employ 16,000 and are stable.
In the long run, the automobile industry faces dramatic changes, with new sources of propulsion and a greater focus on design and marketing. In the not-too-distant future, we will design and purchase vehicles online. The winners in this era will be the most flexible companies able to respond to consumer demands overnight.
If this is where the industry is heading, why should the cash-strapped American taxpayer bankroll failed management teams and the UAW in Detroit, who are clearly not prepared for this new automotive era?
Even if the Big Three get their bailout from reality, it only postpones the inevitable as they continue to grapple with an inflexible workforce and catastrophically high legacy costs. Consumers will still get a piece of the 1970s with every new car they purchase. It will be a repeat of the British bailout of the automotive giant British Leyland. After nearly $15 billion, the British taxpayer is left with nothing but nostalgia.
Recession is like nature's wildfire: It cleans out the deadwood from the economy. The Big Three will survive only as auto companies, not employee benefit organizations propped up with taxpayer money.
After a successful reorganization—not a bailout—the Big Three (or two, by that point) will be able to escape the past and emerge as competitive companies. Chapter 11 might be the last shot for the Big Three to credibly claim it is a new day in Detroit and to win back the faith of the consumer.
Matt Kibbe is president of FreedomWorks Foundation, a grass-roots education organization that believes in lower taxes, less government, and more freedom.
Reader Comments
All the Autocompanies have millions of people who they pay retirement for if Detriot is not bailed out all the retires from over 100 years of car compines and the car companies the big three bought go to the federal government to pay for. If you do not bail them out you will have to pay for those expenses with out taking into account the lose and any other companies that go down in one of the largest metropolitan area in the United States. Either way you will be bailing the out in some way just if you wait you won't get anything good out of it.
Steal from the Poor
I agree that the Detroit automakers and the UAW have no right or rational for calling on the US taxpayer to prop themselves up after years of bad decision making.
Both management and labor have responsibility for their current situation. In particular, I have no desire whatsoever to contribute to the UAW's pension and medical ins. fund (VEBA). I don't, and most American taxpayers don't, have such gold plated benefits packages. To use taxpayer money in this way would simply be a "rob from the poor to give to the rich" scheme.
Simply put, the past labor contracts are unsustainable and must be changed, much more radically than the current 2010 contract, before any of the Detroit 3 have a chance of being competitive (and if they can't become competitive, don't waste a dime of taxpayer $ on them).
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