Is the American Automobile Industry Worth Saving? Pt. 2

The question presumes that A) Detroit’s ailing automakers ARE America’s automobile industry and B) using our tax money to protect Ford, GM and Chrysler from their own incompetence would benefit the U.S. car industry. Not true, on both counts. And by ignoring the flawed assumptions underpinning the argument for raiding the average American’s wallet, bailout proponents are misleading what they condescendingly call “Main Street.” To which I say no, no, and Hell no.

Clearly, unequivocally, the American auto industry does not consist of Ford, GM and Chrysler. In fact, these three Detroit-based companies COMBINED no longer control the lion’s share of the American automotive market. Foreign-owned manufacturers– the so-called transplants– account for over 50 percent of all new vehicle sales within the U.S. For better or worse, they constitute the core of the American automobile industry.

Feel free to debate amongst yourselves whether or not the fact that the transplants’ profits return to their home country is a crucial difference— just as long as you understand that Ford and GM’s North American divisions have been living off of their foreign ops’ profits for at least the last two years. And that this financial flow inwards is decades old.

And don’t forget another, equally salient detail: Detroit-based car companies are, right now, importing hundreds of thousands of cars and millions of parts from outside U.S. borders. For more than a decade, Ford, GM and Chrysler have been Hell bent on “saving” the American automobile industry by destroying it, sending U.S. manufacturing jobs to Canada, Mexico, South Korea, China and elsewhere.

Anyway, if we accept the idea that BMW, Mercedes, Toyota, Honda, Hyundai and Nissan’s American production facilities are a vital and yes, equal part of the American automotive scene, it raises an interesting and completely ignored question: is the federal bailout for Detroit good for the REST of the American automobile industry? Does it “save” them?

The surprising answer is yes. By supporting Detroit’s inefficiencies, a bailout would help maintain a suitably high “floor” for new car prices. So your tax subsidy to Detroit would protect the transplants’ profits, and by extension, their American workers.

On the downside, a federal bailout screws the consumer. It would help prop-up new car prices, stifling the kind of competition that leads to innovation, and increased value-for-money. As far as the non-Detroit-related taxpayer’s personal pocketbook is concerned, letting American-owned automakers fail is the best possible course of action. The American consumer would get a better product at a lower price, for no extra charge.

Sorry. I know: it’s about jobs, jobs, jobs. Inherent in the idea of “saving” the [strictly defined] American automobile industry is “saving” American automotive jobs, upon which the entire U.S. economy supposedly rests.

Again, you can discuss the “ripple effect” of a combined Ford, GM and Chrysler C11 on the wider U.S. economy without my interference. But however great the impact, it doesn’t alter the truth: the word “save” here means “subsidize,” to no appreciable end. I mean, is there any one amongst you who truly believes that injecting $25b of federal capital into Ford, GM and Chrysler will put them back on their feet, so that their workers and products can compete with non-Detroit automakers? If so, you simply haven’t been paying attention.

And once we’re doing a reality check, if saving the American automobile industry is a euphemism for “giving The Big 2.8 a bridging loan so they can get healthy and competitive at some point in the not to distant future,” we need to face facts: Ford, GM and Chrysler will have to shed jobs anyway. Bailout or no bailout, they’re too damn big for the U.S. car market, now that the new car “bubble” (which they created) has burst.

Enough of this misdirection. Let’s get down to brass tacks. The real question is this: is Detroit worth saving?

No, it’s not. Not in its current form. In this I refer you to General Motors Death Watch 1, wherein I proposed that GM should be parted out. I asserted that its current management should take a hike and its constituent brands reconstituted as independent car companies. (Or not.) In the last three years, I’ve seen nothing to dissuade me from this opinion. As for Ford, it too needs to shed brands and reinvent itself. Chrysler, well, Chrysler’s a basket case. Only Jeep may live on.

So yes, the American automobile industry is worth saving. Only it’s not in any real danger. The only part of the U.S. car biz that’s on the ropes is the Detroit contingent. And the only way to save that bit is to let it fail, so that it may be reborn. But no matter how you slice it, and sliced it will be, “bailing it out” is against the interests of the American taxpayer AND the American consumer who, after all, must foot the bill.

At the end of the proverbial day, a federal bailout for Ford, GM and Chrysler would simply prolong the automakers’– and their workers’– agony. Yes, there will be pain. Lots and lots of pain. But sometimes the more painful the mistake, the more important the lesson. This is one of those times. Detroit can not be saved from the reality that they’ve studiously, callously, stubbornly ignored. Nor should they be.