Bailout for automakers?

November 17, 2008

automakers

As Congress debates legislation to help struggling automakers, many Americans say they are uneasy with the plan, arguing that while it may save jobs, it would reward companies for pursuing bad business practices. Some even question whether automakers will be viable, even with support.

“They need to restructure. If they get bailed out they are not going to do it,” said Eric Smith, a paint contractor interviewed in Chamblee, Georgia, on the outskirts of Atlanta.

U.S. automakers say federal aid is vital to their survival, and there could be devastating ramifications for the broader economy if the sector is not stabilized.

“This is an issue of the whole auto industry, if that becomes under severe pressure, the impact on the whole U.S. economy will be devastating,” GM Chief Executive Rick Wagoner said in an appearance on a NBC-affiliated television station in Detroit.

Retired Gen. Wesley Clark says that a rescue of U.S. automakers is important both economically and for national security. In a New York Times opinion piece, Clark wrote that the U.S. auto industry has played an important role in successive military campaigns, from World War II to today, and its ability to continue to develop new technologies is imperative for national security.

Some are calling for executive shake-ups if it would ensure congressional backing for a bailout. “If it was the difference between getting this kind of support or not, obviously the management should consider resigning,” Carl Levin, a staunch industry ally, said on NBC’s “Meet the Press.”

As Democrats finalize a rescue plan, the question remains: should U.S. automakers be bailed out?

(Pictured above: G. Richard Wagoner (R), chairman and CEO of General Motors, testifies next to Robert Nardelli (2nd R), chairman and CEO of Chrysler, Alan Mulally (2nd L), President and CEO of Ford Motor Company, and Ron Gettelfinger (L), President of the United Auto Workers union, before the Senate Banking, Housing and Urban Affairs in a hearing on “Examining the State of the Domestic Automobile Industry,” on Capitol Hill in Washington, November 18, 2008.  REUTERS/Molly Riley)

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184 comments

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By the way, those that comment that allowing bankruptcy will cause a big ripple in our economy is mistaken. Look at the airlines, they all reorganized under bankruptcy and people still flew their airlines during the reorganization. Nothing will change the moment they file. The dealerships will still sell cars. They will still service them. And, the automakers will continue make them. The only thing bankruptcy will do is allow the companies to eliminate big liabilities, namely the pension, healthcare, and the unions. Listening to Rick Wagner testify that a consumer will not buy from a bankrupt company is bull. I for one will purposely buy American if they file bankruptcy even though I haven’t bought American since 1999. I would do it because I would be encouraged that the automakers could finally compete now that the unions were dead.

Posted by Len | Report as abusive

For years the auto industry (manufacturers, unions and dealers)has led the way in overcharging for its product and over compensating its employees at the expense of its customers, parts suppliers and stockholders. And they didn’t start to provide good quality, more fuel efficient products until foreign competition forced it. Now they should continue to reap the rewards of that behavior even though it has turned negative for them. I would not support a bailout unless and until I see sufficient contrition demonstrated by the actions they take in their restructuring.
(For example, how would you evaluate an executive giving up one years salary against what he has already been paid in salary, stock and bonuses over the years and against what he will gain if the company survives and the stock goes up?) Don’t you think those whose actions caused the problem should pay (or at least help to pay a large part for the correction?

Posted by Ed Sand | Report as abusive

Asian car companies invest for the long term. Japan finaced Toyota and Honda with low interest goverment backed loans. Loosing money for decades was OK as long as it helped eleminate the competion. Lately southern states aided asian car companies to the tune of over 4 billion in incentives, not loans but free money if they located in thier states. Add that to the billions already loaned and it only seems fair to help our local auto companies. Countries around the world are helping automakers in thier countries because the industries are so important to local economies.

Posted by kev | Report as abusive

Let the bad quality auto makers go under. Then, buy out the foreign automakers who are successful and conduct business as successfully as they do. After all, this is the U.S.of A. Why should bad products be celebrated and protected? As far as the employees are concerned, if they are good they can find jobs elsewhere.

Posted by Nick | Report as abusive