Dec
6
2008

Car Wars IV: A New Hope

This is some rescue. When you came in here, didn't you have a plan for getting out?

I was struck by this paragraph in today's Washington Post story about the current status of the automaker bailout:

The sums being discussed by lawmakers and the White House fall well short of the automakers' request. Democratic aides said they are talking about providing $15 billion to $17 billion, which would be expected to see GM and Chrysler through the end of March, when president-elect Barack Obama would be in position to take over long-term plans for returning the industry to profitability.
This is our most desperate hour. Help us, Obami-Wan; you're our only hope.

Because, thank goodness, Obama has shown great aptitude in the past in returning giant industries to profitability.

Oh, wait…

I find your lack of faith disturbing.

The Big Three have been in decline for decades. The only question is whether they're going to burn up billions more in taxpayer money on their way out.

It's not as if America doesn't know how to build stuff. Here's Joel Kotkin at Forbes:

Indeed, until the globalization of the financial crisis, American manufacturing exports were reaching record levels. Overall, U.S. industry has become among the most productive in the world--output has doubled over the past 25 years, and productivity has grown at a rate twice that of the rest of the economy. Far from dead, our manufacturing sector is the world's largest, with 5% of the world's population producing five times their share in industrial goods.
We could have a healthy manufacturing sector, including automobile manufacturing, but propping up mismanaged firms makes that less likely. Here's the WSJ, speaking sense to all that will hear:
The car makers' request for a bridge loan, by contrast, looks like a $34 billion bridge to nowhere. It has already morphed into an opportunity for political extortion -- and we don't even have a bill yet. When, in a couple years, costs have not come down as expected because of political pressure to keep the unions happy and the green cars aren't selling -- because they were designed in Washington, not for consumers -- the companies will be back for more money.
Back to Capitol Hill, in their hybrid landspeeders! You will never find a more wretched hive of scum and villainy. We must be cautious.

As the WSJ points out, the incentives are all wrong. You can't serve two masters: the more automakers need to keep the President and Congress happy, the less likely they will be to keep customers happy, by making cars at a profit that people actually want to buy.

And on the flip side, government won't want its blank checks to go for naught. So "it will only be a short step for Congress to begin to coerce consumers to buy the cars that Washington prefers."

I have a very bad feeling about this.

[Quotes, some lightly-altered, from IMDB.]