It must have been so humiliating but it had to happen with the automakers going cap in hand to Washington for a $25 billion bailout. And as the New York Times reports, things are not looking good with politicians suggesting it could just be like putting a band-aid on a bullet wound.
This is a tough one. Letting them fail could devastate the US economy but at the same time, there is no guarantee a bailout would do anything but forestall the inevitable. The automakers are blaming it on the credit crunch but they're the ones who created the problem with their bad management which had them releasing products that the public didn't want to buy.
If you want further evidence of that, check out the 10 cars that sank Detroit.
And so the debate continues.
Republican Mitt Romney, once a presidential candidate says there is a simple solution: let Detroit go bankrupt and make it a managed bankruptcy. "Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course – the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check."
Paul Craig Roberts at the Locust Blog makes the point that it's Republicans shouldn't slag off at Detroit's failed business model when they poured $700 billion into a failed financial model. "Any bailout has its downsides. But if America loses its auto industry, it will lose the suppliers as well and will cease to have a manufacturing sector. For years no-think economists have been writing off America's manufacturing jobs, while deluding themselves and the public with propaganda about a New Economy based on finance. A country that doesn't make anything doesn't need a financial sector as there is nothing to finance."
Over at the Huffington Post, Mitchell Bard makes the point that it's not about a bailout but whether the Big 3 can change their business model.
"The question shouldn't be whether or not to bail out the U.S. auto industry. Rather, the debate should be how assistance to the car manufacturers fits within the larger national energy plan that is greener, self-sustaining and economically positive … Obama was elected because Americans wanted change. I take that to mean that the American people are ready for big solutions to big problems. I hope that the crisis in the U.S. auto industry provides the first chance to address a big challenge, rather than ignore it and battle over an issue that is merely a consequence of a much larger problem."
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