Auto Bailout: Let Detroit Go Bankrupt?
I have been trying to figure out what I think about the request from the "Big Three" automakers for federal support. (GM, for example, makes it case inthis You Tube video.)
I should acknowledge that my interest in, and thoughts about, the "bailout" are certainly shaped by having grown up in Flint, Michigan. When I grew up in Flint, it was a city of 200,000 and nearly 90,000 worked for General Motor. Today, it's a city of 114,000 with some 9,000 autoworkers. I think it's fair to say that the people of Flint (even those of us who no longer live there) know better than anyone how dramatically, and tragically, the American auto industry has failed.
Former (and future?) Republican presidential candidate Mitt Romney argues in today's New York Times that it is time to "Let Detroit Go Bankrupt." More specifically, he calls for a "managed bankruptcy," saying that,
On the other hand, this week's New Republic has a powerful article by Jonathan Cohen ("Panic in Detroit") in which he argues that the automakers are well on their way to making the very type of changes for which Romney (and so many others) are calling. He writes:
I agree that the industry needs to reinvent itself. I hope that Cohen is right that GM, Ford, and Chrysler have - at long, long last - come to understand that. And I hope that our government will find a way to soften the blow which will be felt, first and foremost, by those clinging to the lowest rungs of our economic ladder.
A managed bankruptcy may be the only path to the fundamental restructuring the industry needs. It would permit the companies to shed excess labor, pension, and real estate costs. The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.On the radio yesterday morning, I heard Romney say that this would include the Federal government "standing behind" carmaker's warranties. That is, to say the least, an interesting suggestion for a conservative to make.
On the other hand, this week's New Republic has a powerful article by Jonathan Cohen ("Panic in Detroit") in which he argues that the automakers are well on their way to making the very type of changes for which Romney (and so many others) are calling. He writes:
GM, Ford, and Chrysler are taking precisely the sorts of steps everybody says are necessary--or, at least, they were taking those steps until an unexpected trifecta of high gas prices, vanishing credit, and a deep recession hit. Rescuing the auto industry is not, as so many people suppose, a question of giving Detroit one extra shot at transformation. It's a question of giving Detroit a chance to finish a transformation that was already underway.I keep coming back to the fact that American autoworkers (and those who work in industries which primarily support the auto industry) are among the victims of the industry's hubris. Workers who had no input into the decisions that have proven so wrong-headed will be punished for those decisions. As the auto industry flails, these workers are likely to be turned out into a destitute employment arena where they'll struggle to (and possibly fail to) land new jobs, provide for their families and figure out how to stay afloat in an economy that's the worst it's been in decades. At the end of the day, it's these blue-collar workers who will undoubtedly suffer most from the corporate missteps they had no part in making.
I agree that the industry needs to reinvent itself. I hope that Cohen is right that GM, Ford, and Chrysler have - at long, long last - come to understand that. And I hope that our government will find a way to soften the blow which will be felt, first and foremost, by those clinging to the lowest rungs of our economic ladder.