GM Bailout

GM and Ford are once again begging at the doorstep of every honest, tax-paying American. Just two months ago, Congress gave the Detroit Three $25 billion dollars worth of bailout money, and now they want more. They say this time it’s different; this time, with only $50 billion, they can become profitable. The worst part is GM’s argument for the bailout: they say if the taxpayers don’t bail them out, it’ll spell horrible doom for the economy.

Now, I could go off on an economics lesson about how moving workers and resources from a less productive activity to various other more productive activities is a very good thing, and has great benefits for society. I could quote economists talking about how preserving jobs in unproductive business is actually a bad thing and hurts the economy. But people generally aren’t interested in stuff like that. So I’ll take it in another direction.

First off, GM’s trouble isn’t an industry-wide problem. Other auto makers are having difficulties, but they’re not asking for a handout of taxpayer’s money. For years, GM and Ford have been lagging behind their competitors. To put it in economist’s terms: they’ve been making cars that consumers don’t value as much as the cars made by their competitors. But instead of changing their cars or their way of doing business, they just spent their money on lobbyists. They tried to work the system to stay afloat. Companies like Honda and Toyota kept improving, making cars that consumers wanted, anticipating demand, while GM and Ford just… didn’t.

Secondly, 266,000 people is a lot of people. That’s a massive work force, but there are 9 other US companies that are have a bigger workforce than GM, and one of them is Wal-Mart. What if Wal-Mart asked for a handout from the US taxpayers? I doubt they would get the same amount of sympathy.

So what do we do? If I’m not part of the solution I’m part of the problem, right? Well, if we bailout Detroit again, $50 billion will only be the start. We’ll be locked-in to a partnership with a failing company, forced to “protect our investment” by giving more and more money to the sinking ship, but there will eventually come a point where it just won’t matter, and it’ll go under anyway.

So get it over with now. GM needs to file for bankruptcy, that’s all there is to it. Bankruptcy protection will get them out from under the thumb of the UAW, giving them a chance to really become competitive. GM could strip down and become a lean, mean, automaking machine, freed from all the red tape and bureaucratic nonsense that bogs it down now. But even if they don’t, even if GM fades into nothingness, that’s still a good thing. Those 266,000 GM workers and all the resources currently being used by GM in unproductive ways would be freed up. Those workers would be a valuable pool of employees for productive businesses, and the resources and buildings could be bought up and used by productive businesses. It would give a nice boost to our economy. But will it happen? Not bloody likely.