Sunday, November 16, 2008

Detroit Bailout Tableau

I still lean ever so slightly in favor of a bailout of "the big three" US-based car makers. There are strong arguments for and against, and big risks no matter what.

Some good reading on it -- and this list is hopelessly partial:

More or less predictably (not to say unreasonably), Megan McArdle is against, a view strongly seconded by Will Wilkinson; to which Publius and then Hilzoy reply forcefully. Freddie chips in some good commentary about the blurry line between economics and theology, and Matt Yglesias more or less splits the difference.

1 comment:

Mike said...

I think there's an important distinction to be made between their troubles and those of the financial system. Unlike the financial firms, most of whom had at least been making money from their shell game, Ford, GM and Chrysler have been slowly declining for many years. The long run of crappy products they produced in the 1970s and 1980s has cost them a generation of customers who won't consider them. More importantly, they have given no sign that they plan to change anything they do; they just want my grandchildren's money (remember,this is all deficit spending) to continue with the same failed business plan that got them to this point.

The website has had long-running coverage of the Detroit automakers slide, and they're largely in favor of letting them die. I have seen commenters who think that the government should step in to ensure an orderly bankruptcy process, which would be painful to many but would at least reform the companies to compete. I'm inclined to believe this is the least of the bad options.

I have also seen that the latest idea involves a federal governing body to oversee the companies' operations. This would have the potential to make them eternal wards of the government,since as Robert Farago said at The Truth About Cars, " when was the last time a federal organization said, right, we’re done. Disband us, close the office and fire the secretaries so we can all go home?"

Unfortunately, I don't see a good answer to this. I think they may have to follow the same painful path the steel industry took years ago, otherwise they'll just continue to make cars no one wants to buy while the executives pad their bank accounts and autoworkers' salaries get subsidized by less-fortunate taxpayers.