Why We Must Bail Out the Auto Industy

After watching the round of political talk shows lately, it's time to share my thoughts on the proposed auto bailout. If you want to see the country go to hell in a hand basket, returning to the days of the Great Depression, just let our government continue to haggle over the issue of whether they should or should not provide a bailout plan to the "Big Three" automakers -- GM, Chrysler, Ford.

Like the housing market, the auto industry is also a driving force for our economy. The auto industry touches almost every facet of the economy. For instance, if we allow GM to go under, using Reagan's popular "Trickle Down" economic theory, let's ask ourselves a few questions to see how this will affect the ailing economy.

How many GM employees will be out of a job? How many suppliers of GM parts will be out of business? How many transport and rail companies, who are responsible for delivering GM's new vehicles to the dealers, would be out of business? How many dealerships and their employees will be out of business? How many lending institutions responsible for providing loans will be out of business? How many ad agencies and their employees will be out of a job? Where will customers find GM genuine parts to repair their vehicles?

In fact, owners of GM's vehicles will find that they are further upside down - owing more on the vehicle than what its actually worth at the time of trade - in case they attempt to trade a vehicle in for a non-GM brand. Does the government really want to provide unemployment assistance for the number of individuals that will be out of work? Is that really a smart move? How much tax revenue would the economy lose from a failed auto industry? Furthermore, how many charities, little league games, award shows, and other events will survive without the assistance or support of the auto industry? And how many more homes will go into foreclosure?

To address the aforementioned questions, the Center for Automotive Research released a report recently that detailed the impact the three Detroit-based automakers could have on the economy if we allow them to go under. (View report as PDF file here.) Overall the U.S. economy would lose almost 3 million direct and indirect jobs in the first year. Added to that, the U. S. government would lose at least $156.4 billion in taxes over the first three years. Is this really worth forgoing the investment of a bailout plan of around $25 billion or more, if needed?

Now this isn't the first time the troubled auto industry has asked for a helping hand. In the seventies, when Chrysler was nearing bankruptcy, the government provided a sizable loan to Lee Iacocca, the former chairman and CEO of Chrysler. With the government's assistance, he saved the company from bankruptcy, saved jobs and repaid the borrowed loan ahead of the agreed upon term. So what's wrong with providing a loan to a company that actually repays their debts ahead of schedule? Just think, if the U. S. wouldn't have rescued Chrysler, we wouldn't have had the minivan, the infamous K-car or the cool-looking 300C, which was designed by Ralph Gilles, who is the first person of color at the company to become vice president of design. In case you don't remember the K-car, ask your parents.

Over the past week a number of politicians and so-called experts have weighed in, regarding this bailout plan. Some critics believe the mammoth U. S. auto industry is irreparable. If that's the case, why has Chrysler had nine lives? Many of the critics, who believe we shouldn't bailout the industry have never worked in the industry nor have they managed a business. To me, it's like someone who has never been married before providing marriage counseling.

In case this bailout decision isn't resolved before President-elect Obama takes the wheel, it has been reported he has plans on appointing an auto czar to assist in getting the U. S. auto industry back on track. Some of the individuals under consideration for the new post are Jason Furman, an economic adviser; Georgetown University law professor Dan Tarullo; Joshua Steiner, a former Clinton official in the department of the Treasury; Michigan Governor Jennifer Granholm; and former Michigan Congressman David Bonior. Although I am not as brilliant as Obama, I would recommend that he stay away from someone who doesn't know the industry. If Obama asked me for my suggestion, I would appoint Iacocca, since he's been down this road before.

Yes, like many of the critics, I realize the U. S. auto industry must be retooled, becoming more competitive by building more fuel-efficient vehicles. Moreover, the unionized industry will have to consider wage concessions and the fat-cat senior level executives will have to readjust their lucrative pay plans. I believe the auto industry would prefer making these concessions, as opposed to being closed for business.

And finally, our government isn't the only one to offer financial assistance or subsidies. Its been reported that the Asian government assisted Toyota in developing the technology for their popular hybrid - the Prius. Surely if the Asians can provide assistance to their auto industry, we should do the same for ours.

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