By Mary Kate Cary, Thomas Jefferson Street blog
The heads of Chrysler and General Motors asked Congress this week for an additional $20 billion in aid while they simultaneously cut 50,000 jobs. This was on top of the $17 billion they had previously requested and the thousands of workers they've already laid off. Then this, buried in the Washington Post coverage: "In addition to U.S. loans, GM is also requesting financial support from the governments of Canada, Germany, Britain, Sweden and Thailand."
Is there enough money in the world to bail out American carmakers?
I don't think there is. Plus it looks like they'll get their bailout and file for bankruptcy protection as well. Filing for bankruptcy isn't so bad. The airlines seem to file for bankruptcy all the time, and we still have plenty of choices for air travel. But let's get the most bang for our bailout buck. Let's leverage our tax dollars and put a few strings on the bailout money.
The auto industry is full of smart, hardworking people—after all, these are the folks who brought us airbags, OnStar navigation systems and antilock brakes. Maybe it's time for the best and the brightest to look at completely reinventing the American car industry. We know Detroit has the technology to create the next generation of cars—electric hybrids and even hydrogen cars—but what's lacking is any sort of incentive to move in that direction full-tilt. It's time for "Detroit 2.0." Americans love a second chance. Let's begin the second life of the American car industry, and become the world's leading manufacturer of alternative energy vehicles.
Let's just stop making new gasoline-powered cars. They can go the way of big mainframe computers, eight-track players and analog TVs (well, we're almost there). Now's the time to make the switch to producing affordable, safe, non-gasoline powered cars. Of course there would be a lot of pain in making the transition, especially in oil- and gas-producing states like Texas and Alaska. But there's already a lot of pain out there right now. Think of the long-term profitability of such vehicles, the whole industries that would spring up in response, and the new "green" jobs that would follow. Not to mention the national security benefits of cutting our reliance on oil from OPEC nations.
The root of the car manufacturers' crisis really is that they are stuck with a product that no one's buying. You could even call it a toxic asset: millions of gas-powered cars people don't want and these days, can't afford.
Similarly, the New York Times reports that White House Press Secretary Robert Gibbs is refusing to rule out a second stimulus package on the heels of the one the president signed yesterday. Before we spend more money on a second stimulus package, we've got to fix the problems in the banking industry. There is widespread agreement that the toxic asset problem is at the root of the banking crisis, and until that problem is solved there isn't enough taxpayer money in the world to get economies from here to Europe to Japan moving again. It's just like the auto industry.
The toxic assets on banks' books are similar to the gas guzzlers sitting in dealers' parking lots across the United States: no one's buying them, it's hard to say what they're really worth, and they're standing in the way of fixing a broken industry. It's time to get rid of the toxic assets in both the banking and auto industries before we spend another dime.
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