Bailout Watch 252: The Last Refuge Of The Scoundrel

Since the first mutterings of an auto industry bailout, the idea has wrapped itself in unabashedly patriotic rhetoric. Now that the battle for the billions has been joined, this nationalist veneer is reaching near-self-parody levels of earnestness. All the while we’ve been arguing that saving American jobs and saving the Detroit Three in their current forms are mutually exclusive goals. As reality slowly becomes too real to ignore, directors, representatives and pundits are beginning to acknowledge this trade-off, although you might be surprised by how they’re playing. Or, if you’re as cynical as we are, not. The gameplan comes from Mark Phelan of the Detroit Free Press, who argues that to survive, Ford and GM must “must show a business plan that’s profitable at much lower sales volume and has upside flexibility to build more vehicles and for workers to make more money with overtime. This will require plant closures and layoffs.” At home, of course. Meanwhile, Phelan argues that “GM and Ford’s greatest assets are their worldwide facilities and capabilities…

The engineering, design and manufacturing of some GM and Ford vehicles sold in the U.S. market will and should be done outside U.S. borders.” Oh yeah, and “If the goals are to protect U.S. jobs and the manufacturing base, the plan should make Chrysler an attractive acquisition for a global automaker.” Now, at least Phelan is finally facing reality, but what he’s not acknowledging is that these actions remove any and all incentive for lawmakers to write a bailout check. Does anyone in DC really want to return to their constituents and say “despite a massive deficit, I gave $25b+ to a couple of failing multinational corporations who used the money to close US plants and invest in jobs overseas?” After all, despite the patriotic bailout beggary, GM has no plans to stop its $200m investment in an Indian engine plant, after already sinking over $1b in that now-contracting market, according to Bloomberg. It’s not that cutting at home and investing abroad aren’t good for Ford and GM, as these steps are clearly the keys to its future success. The question is simply, why on earth would congress subsidize this behavior?