The banks got their bailout, will the automakers be next? I'm sadly inclined to say probably, despite the first bailout's focus on presidential politicking. The forthcoming bailout will likely follow the same path. But it doesn't have to be like that; the auto industry can be saved without writing a blank check.
The greatest obstacle to any bailout revolves around the concern of limited monetary resources; is any one entity more worthy than the next? In the case of the big three, a valid argument could probably be made to support the bailout of each company, but a definitive answer does not exist. So what comes next? Two questions must be asked of the situation; (A) Is the company worth saving? (B) Can the company use the money to survive, while providing a service or product that enables all involved to thrive? In the case of the auto bailout, A is essentially unarguable as people need cars, but B presents a dilemma. Is a stagnant, but functional auto industry better than no auto industry at all? Capital Hill seems to be struggling with an answer, but it doesn't have to be like that; the auto industry could be made better.
The American Auto Industry has demonstrated a complete inability to compete with the likes of Honda and Toyota over the past decade. Why should the American Taxpayer be required to prop up these failing entities with years of historical incompetence? The truth is, Americans need cars, and at the moment there are only three American options. In the future a fourth company may arise, but in the interim, at least two of these companies must exist; for both diversity of product and antitrust laws.
If two of these companies must survive, doesn't it make sense to choose the two companies best situated for future growth and expansion? Here's the plan: a massive auto industry throwdown with the winners splitting the currently proposed $25 Billion bailout. Each company sends a representative to a congressional oversight panel and the rules are decided in committee. The competition is open to any company, any entity, any single person meeting predetermined qualifications and will last 6 months. If at the end of 6 months, the designated objectives are not met, the $25 Billion is not allocated and the companies must survive on their own, or fold. If just one company meets the objectives, the next closest company must also receive funding. All of these contingencies, and others, must be established in advance, by the aforementioned committee.
If the participants want to compete, they must be held accountable by providing non-subsidized financing. Banks accepting money from the Troubled Asset Relief Program (TARP) would be required to provide a loan to any interested participant using reasonable lending discretion. Each bank would also be forgiven of the 5% interest rate associated with their participation in TARP, upto the amount loaned to automotive throwdown participants. Essentially all funding for the throwdown would be provided by TARP through participating banks. The Treasury Secretary could then insure these automotive loans, thus removing liability from the banks themselves. Under these circumstances, the banks benefit by collecting interest and the government is not required to spend additional money (assuming the banks are responsible lenders) for at least another 6 months.
This scenario presents essentially two possible outcomes; either (1) All participants collapse, or (2) at least two participants succeed and the automotive industry gets, what is hopefully a jump start into economic and technological prosperity. In both scenarios, it is assumed that the banks made reasonable lending decisions, and are consequently unaffected by either outcome.
The first scenario presents possible ramifications; I'll start with job loss. Should the jobs created by the autos factor into the bailout decision? There seems to be a growing movement, John McCain included, who foolishly believe once manufacturing jobs are lost, they are gone forever. The manufacturing sector will never disappear so long as there are items to be made. Anybody working, with the right support can be retrained to make another item, so long as there are other items to be made.
So how could the government ensure job availability to these workers in the event of an American automotive collapse? I suggest a public works project. Anybody unemployed can go work for the federal government, in their home state building windmills or solar panels under a newly created National Alternative Energy Agency (NAEA). Using the World War II model, a massive industrial complex could be created that generates new jobs and reduces America's strain on foreign fuels.
If the government is willing to float a $700 Billion check to the banking industry why wouldn't it spend $647,521,359,420 (PDF) to alleviate America's need for fossil fuel generated electricity. Wasn't the down fall of the auto industry higher gas prices? Doesn't it seem absurd to blindly support a failing industry without addressing the central cause of its failure? Yet it seems all too likely that such a thing will happen.
The auto industry has survived on minor revisions for the better part of a decade, but America doesn't need a recolored cozy-coupe, we need a green cozy-coupe.
Ready, Set, Bailout?
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