On the Auto Bailout

Since it just makes good sense to understand a problem before we dole out the cash, let’s ask ourselves a question before we go spending (quite a bit) of our tax dollars.

Why are the U.S. auto makers in a crunch? Of course our economy isn’t great and that’s one reason, but you must still ask “Why are they doing worse relatively compared to the foreign competition?”

A lot of reasons: Reliability rankings. Worthless bureaucratic unions. Poor management. Inability to adapt to consumer demand, inferior engineering discipline, etc, etc, etc.

Each one of these reasons, and more, are worth their own posts entirely, but since I don’t have time for that at the moment, let’s continue.

So, we’ve identified why they are suffering. We’ve identified a problem. Now let’s come up with a solution.

Let’s think of what the auto bailout is supposed to do: give cash to auto manufacturers, which affords them a liquid capital cushion, which in turns enables them to keep people employed. Keeping people employed is good for the economy – they can go out and buy things and keep the money cycle flowing.

But what happens a year from now when the money has run out?

They’ll still be producing inferior cars. The worthless unions will still exist. Management for the entire industry won’t be likely to change that fast. They won’t be able to engineer new cars that meet consumer demand that quickly.

We as a nation will be in even more debt and we’ll still have that big glaring economic problem staring us in the face. This is typical Congressional behavior, “Let’s spend money to put a Band-Aid on the problem and hope it goes away. Never mind that we’re not addressing the root cause of the problem…”. That’s Congress’ solution. A Band-Aid that solves nothing.

No one is addressing the fundamental problem – that U.S. auto manufacturers produce an inferior product under an inferior system. In a capitalistic society, as ours clearly is, the most efficient entities (corporations, processes) ‘win’. It is cut throat. If you can’t compete, you get swallowed up. This is what is happening to the U.S. auto manufacturers. They’re imploding under their own inefficient weight. The rules of capitalism are prevailing.

So, any attempt to give them money without fixing the problems is completely futile. It’s a waste of time, energy, and our hard-earned money. The problem won’t go away, and we’ll be further in debt.

I encourage you to contact your Senator and U.S. Representative and make known your feelings. Don’t stand for a ‘band-aid’. Demand more!

This nicely sums up the situation: