Bailing Out Detroit
BAILING OUT DETROIT....John Judis, feeling in a rantish mood this morning, wants to know why we're dragging our feet on rescuing the auto industry. If it fails, he says, it won't be like the semiconductor industry in the 80s after the Reagan administration restricted imports and subsidized new research:
The upshot was that the U.S. did lose out to Asia on low-cost semiconductors, but it retained its lead in the most advanced computer technology....That's not going to happen with automobiles and trucks. With them, it is not going to be possible to abandon manufacturing while retaining the ability to engineer and administer. The industry will disappear the way the American television industry disappeared. American workers and engineers will lose their ability to compete in a major durable goods industry — and that's not a good thing.
Other countries seem to understand this. French President Nicholas Sarkozy announced a $33 billion bailout package yesterday. France is not in as bad shape as the United States, but Sarkozy is worried about the French auto industry and is promising to protect it in exchange for a commitment from it to produce cars in France rather than to outsource the production of them.
Speaking for myself, I guess part of my problem is arguments like this one. Will the demise of the Big Three really decimate our design and engineering abilities? Was the loss of the television industry really that big a deal? Do we really want to follow the French lead of bailing out their perpetually ailing national champions year after year?
I guess I want to see a different argument. I don't mind spending the money that much — what's $34 billion between friends? especially during a world historic economic collapse? — but I want to hear a reasonably plausible explanation of how Detroit is going to become viable again in the face of a massive global oversupply of auto manufacturing capacity. Someone's car production is going to have to fall pretty steeply over the next few years, after all, and I want to hear a plan for how it's going to be Germany's or Korea's, not ours.
Even a great plan would only be an absolute minimum requirement, but at least it's a minimum requirement. If we're going to bail these guys out, there needs to be at least, say, a 25% chance that the restructuring plan will produce healthy, going concerns five years from now. I'm not sure I've seen that plan yet, and if being 30 days away from running out of cash isn't enough incentive for GM to produce one, just exactly what is it going to take?