The Case Against a Bailout


Should the government bail out the U.S. auto industry to keep the players from going into bankruptcy?—Bill VanderMolen, Pittsfield Township, Mich.

How about this instead: The boards of Chrysler and General Motors (GM) put their companies into bankruptcy with the clear intent of reorganization and merger. As radical as that sounds, it's the best road we can see to a viable future for the industry.

And yes, the U.S. car industry does belong in the future. Free-market proponents have a point about the industry's "natural demise." Despite huge progress in American quality and design, well-run German, Japanese, and Korean companies have taken about half the U.S. market, and the competition—which will include China and India—is only getting tougher. But like many others, we believe that for the sake of jobs, national defense, and self-respect, America needs to keep its "true" domestic auto industry alive.

A government handout, however, isn't the way to make that happen. Washington would impose conditions and promise strict oversight, but it simply can't push through the kind of transformative change the industry needs. There would be too much political opposition, and regardless, the bailout sums being bandied about—$25 billion of taxpayer dollars, for starters—would only keep the Big Three heaving along, basically as they are. It's a life-support solution, not a cure.

Read the full article at Business Week

Date published: Nov 18, 2008


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