This is a tough one for me.  Anyone who’s been around me in the past year knows my seething contempt for the Big 3.  The fact that they could be so willfully ignorant to state of affairs in the auto industry is completely unfathomable to me.  So in this vein, I would like nothing better than to see GM topple to ground for their gross mismanagement.  The Big 3 truly could have been leaders in the new auto industry if they had taken steps to improve their fuel-efficiency standards 10 years ago and gone out on a limb to develop alternative energy vehicles.  Instead, they went kicking and screaming to Congress over CAFE standards, and continued to pump out SUV after SUV in a blind must-maintain-the-status-quo mindset.  So, basically, f you guys for being such idiots and making me buy a Japanese car.

On the other hand, there are literally millions of people that would be affected by a Detroit collapse.  Now, the laissez-faire wing will be coming out of the woodwork explaining this away as an “adjustment” and some “rebalancing” will be needed.  Their are two problems with this line of thinking: a) the sheer size of this collapse would be devastating, b) these same preachers of free market doctrine won’t provide the relief to these working families to “adjust.”  So, in my view, there’s two ways you can go about doing things here.  You can either prop up the auto companies, hope that they return to solvency in the future, and save the millions of people from being heavily affected, or you can let Detroit fall, and provide extensive social services to the millions affected in order to assist them in their transition to another segment of the economy.  Both ways cost money.

So the big question then becomes, which way is cheaper and more effective?  I’d say the former, assuming you believe that these same executives that have run these companies into the ground based on a hear-no-evil brand of ineptitude can actually return them to dominance.  These prime loans to the Big 3 will eventually be payed back, with interest, and will have the least amount of impact to the millions entangled in Detroit.  But the assumption here is a big one.  Can these companies return to solvency?

Here’s where Congress may be able to provide a nudge.  By stipulating in the terms of the loan that the Big 3 must begin development of alternative energy vehicles, specifically plug-in hybrids, these comapnies may be pushed on to the right track.  Now this kind of steps in to some dangerous territory that borderlines on government planning of an entire segment of the economy, but if you structure it in a way that provides incentive, rather than command-and-control, it may just work.

I don’t like this bailout.  At all.  But the more I think about it, and the more I learn about the sheer size of the number of people involved, the more inclined I am to accept it.  Although, the devil is always in the details…

[Update]

Turns out CAPAF agrees:

To ensure that the managers who helped create this mess are not unduly rewarded, the loans must disallow excessive executive compensation. In addition, the auto companies must fulfill their commitments to provide both health care and retirement security for their employees and retirees. The companies must commit to continue their research and development of advanced, clean-vehicle technology and energy efficient manufacturing. A loan oversight board should ensure the companies develop a long-term business plan based on the production and sale of fuel-efficient vehicles.

The auto companies should embrace—not resist—the transition to less polluting vehicles. They should assure Congress that they will cease their legal and lobbying opposition to the imminent new fuel economy standards, and the California motor vehicle greenhouse gas standards that President-elect Obama said he would allow. These measures will reduce oil dependence, increase national security, save families money, and reduce pollution. In addition to harming the nation, continued opposition to these standards would keep the companies on the path that got them in this mess in the first place.

Please support the $25 billion loan for U.S. auto companies and include the aforementioned safeguards. This will help protect American jobs and ensure progress toward significantly more efficient vehicles.

Tags: auto bailout, politics

This entry was posted on Monday, November 17th, 2008 at 12:26 pm and is filed under Some Pulp. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.