Observations On The Government Assisting the Auto Industry

I’m no expert on economics, nor do I claim to know everything about the current situation that we’re in, but I do know that it is not good. This is an open invitation to correct me if I am wrong, but I think I have a grasp on the situation. That said, when it comes to the government bailing out the automobile manufacturers, I say no!

There are three reasons why the automobile companies are going under right now. First, one of the smaller reasons, the government has put so many environmental regulations on vehicle’s and the gas that they consume, that it hinders the companies ability to make vehicles that give the people the most bang for their buck. Many car and truck owners will buy a new vehicle and mod it to get better gas mileage. When it comes time to send the car to emissions they just put the stock parts back on so they can pass the ridiculous test. A test that ends up hurting low income families, because generally low income families drive older cars that require the test, while the newer, more expensive cars don‘t.

So what keeps the environmental problems from plaguing the foreign automakers? I’m glad you asked. They were already used to making cars that got good gas mileage, plus its not that taxing on the company to endure some regulations from the EPA because they are so far removed from the other issues below.

The second, and larger reason why these companies are failing is because the quality of their product does not match that of their foreign competitors. Many moons ago, when Nixon and Carter were in office our country went through some tough times, arguably tougher than these day’s and people had wait in long lines for gas, if you don’t believe me watch that movie “Miracle” you‘ll see the gas lines in the movie, anyway, that put a light bulb over the heads of the foreign automobile makers. You see, as I said, they were already making small, more fuel efficient cars, and given our fuel situation at the time they figured selling these cars to America would not be that hard to do. And it wasn’t! The people actually liked the cars and that forced the American companies to make a decision, either we make smaller and better cars or keep going where we’re going.

The third reason that I recently learned about is union involvement. One thing that separates some of the foreign automakers from the domestic automakers is their lack of unions. According to an article from cars.com, about foreign automakers in Indiana, when the energy crisis hit in the 70’s, as I said earlier that opened the door for the foreign automakers to come in. Later on the Japanese automakers started building in the U.S. “but with lower costs, using non-union plants to keep the cost per unit-produced below the cost for domestic-made cars.” The problem is that the unions have the domestic manufacturers tied into to tons of deals that they are required to pay for. When the automakers are forced to pay their dues they go into debt doing it. In an article published a year ago, annalists estimated that Ford owed around “$31 billion in future retiree health-care costs”, these are things that were promised to their employees after being negotiated in by the unions. It seems to me that when there’s an extraordinary emphasis on the wellbeing of the employees of a company and not the company itself you are bound to run into problems. It doesn’t make sense to risk the company to make your employees happy.

Before I go on let me say that any one of these problems alone is not enough to do the damage that has already been done, it is the combination of them all that really hurts the domestic automaker.

According to the article from cars.com the employees of foreign automakers that build in Indiana have not seen any reason to unionize. The company keeps the people it employ’s happy. The article also said that the automakers build factories in right-to-work states, which makes it difficult to unionize.

In the article Joe Phillippi of AutoTrends said that “When the Japanese interview workers here for jobs, it’s not that they screen potential hires for their anti-union feelings,

But they do screen them for their pro-teamwork attitudes. When they needed 1,000 to 2,000 workers, they had 10,000 to 20,000 people coming in for interviews. They had the pick of the litter from those who, while not anti-union, were at least not readily receptive to a union.”

I don’t want anyone to get the wrong idea about my thoughts on the subject. I like American made products, but as an American I am a capitalist as well and if someone makes a better product I see no problem with buying it. The next thing that I am going to look into is bankruptcy, because a lot of people are saying they’d prefer the domestic automakers file for bankruptcy before the government spends anymore money.


Read this article by Charles Krauthammer from The Washington Post. This better explains the ramifications of a nationalized automobile industry. Its not good a sounding future if President Elect Barack Obama goes through with this.


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