The idea of bailing out the automakers is a bad one because it only delays the inevitable while bleeding the taxpayer. If the government simply gives the companies money the money will get spent and then they will need another bailout.
What Detroit needs is a restructuring.
This can only take place by putting the companies in a state of bankruptcy so they can get rid of unsustainable union labor contracts, incompetent management and weak business plans.
The existing labor contracts put the American automakers in a position where they cannot compete. They are paying extremely high wages for their present labor while paying unsustainable high costs to support an army of people who are retired.
Under the protective umbrella of bankruptcy the auto companies can get rid of these unsustainable contracts and incompetent management and then retrench. The only possible proper role of the government would be to guarantee loans made to the companies. Even that is a dubious one..
This whole mess is the fault of both the unions and management. Neither side has shown much concern or vision for the implications of their agreements for the future. The unions exerted the threat of strikes to push for unsustainable wages and benefits while management buckled under rather than fight.
A lot of this happened while Detroit had a monopoly on the car market. Labor and management both thought they could gouge the buying public for whatever prices were needed to sustain the huge wages and benefits given to the auto workers.
However, something happened on the way to the money tree. The Japanese car makers came to the rescue of the American car buyer. The Detroit monopoly was broken by high quality cost effective cars made by the Japanese.
There are a number of very important implications and lessons Americans should take from this sequence of events:
-- We are now in a global economy. We will have to compete with the rest of the world or else.
-- If we let Unions gain power in this country they will most probably ruin any new area of business they get into. Any unionized company will have a hard time competing.
-- Employees will always have to be concerned about the welfare of the company they work for. When the company suffers they will too.
-- Foreign competition works to the advantage of the American car buyer. Just before the Japanese cars started arriving, the quality and performance of the American cars was sinking to unbelievable lows. The quality and performance of today’s American cars are much better than they would have been without the foreign competition.
-- Both companies and employees should avoid pension plans. There is too much that can go wrong with a pension plan. Private investment accounts are much better for both the employee and the company. In fact, this has become so apparent that almost no private company is offering a pension plan to new employees.
While this is an unfortunate state of affairs for the U.. S. auto industry, it can recover if the right steps are taken. If things are done right, the American car industry can eventually be better than ever.