U.S. Auto industry wants more

PHOTO: General Motors HQ

According to CNN, GM and Chrysler want $21.6 billion more in loans from the American government. This is juxtaposed with their plans to cut approximately 50,000 jobs worldwide.

The logic behind more loans would be that if GM and Chrysler went down the tubes, more than 50,000 jobs would be lost, and the ripples throughout our economy would be disastrous. That’s not an unreasonable line of thinking by any means. I’ve been scared into believing it myself. But I have to think there is a better way than just throwing billions of dollars at these companies every three months.

On a side note, if my calculations are correct, with $21.6 billion we could just pay 50,000 people to sit on their butts for 10 years.

I think Robert Reich (Clinton’s Labor Secretary) is correct when he says that more money for the auto industry needs to be focused on creating jobs, rather than merely staving off the death of these corporate giants. After all, what good is saving a GM or Chrysler that employs a mere fraction of the people they once did?

Reich also reminds us that “foreign-owned automakers, already producing cars here in the United States, employ – directly or indirectly – hundreds of thousands of Americans.” But he stops there, and doesn’t recommend what I’ve always thought would be a good idea. We should help a well structured company like Toyota take over the assets of GM and Chrysler under the condition that they maintain a certain number of jobs in the United States for some predetermined amount of years. Along the way, a company like Toyota might end up making GM and Chrysler worth something again.

Update: Yglesias puts it another way that might make more sense:

If it’s the jobs we care about, we’d probably be better off spending the money giving different jobs to auto workers—spend $14 billion+ on Detroit to Chicago high-speed rail or something (ditches, anything)—which would have the same beneficial employment effect, avoid bailing out shareholders and managers, and help reduce auto industry overcapacity thereby lending a helping hand to Ford and to U.S. production of “Japanese” cars. Otherwise, if every country around the world insists on sinking more and more money not into its nation’s car companies instead of into its people who work for car companies then we’ll have a situation where the whole industry just keeps shrinking and sinking slowly.

Flickr photo by Ahren D

2 Comments

  1. Ian

    So the first bailout is working then?

  2. Chris

    Absolutely.