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Column: Auto Bailout Is Just A $25 Billion Lemon

This story was written by Kyle Schmidlin, The BG News


Another dying American industry is looking to the check-writing pen of Uncle Sam for salvation. This time, it's the automotive industry.

Members of both parties in both chambers of Congress have debated and fine-tuned the proposed rescue package of $25 billion. But the question must be asked whether it is really the role of government to intervene on behalf of failing industries.

The auto industry has provided jobs to millions of Americans, and in more innocent times, it embodied the American dream. Generations of my own lineage have provided for themselves and their descendants, and retired comfortably, by working for Ford, GM and Chrysler. Northwest Ohio and Southeast Michigan were built by the auto industry.

Now, however, the companies, via their own unwillingness to innovate, may render themselves extinct. To try to protect a faltering economy and American jobs, Congress is debating whether or not to offer the Big Three automotive companies an aid package.

The number of jobs that may be lost to the automotive industry's collapse is staggering. According to a recent study by the Center for Automotive Research, the number of jobs lost if there is a total reduction in Detroit company operations is around three million for 2009, and with a 50 percent reduction, about 2.5 million for 2009. Numbers as high as one in 10 jobs lost have also been rhetorically spun out in recent weeks, but those numbers are probably high.

The same CAR study, available from the organization's Web site, cargroup.org, also examines the financial impact of a sudden loss of jobs in 2009. Over a span of three years, personal income could drop by a staggering near-$400 billion.

Devastating effects on the economy are well-understood, and nobody would ever suggest the demise of the automotive industry could be a positive thing. However, problems arise on levels of both principle and of practical application when one begins to consider writing them a check.

For starters, it is a hard sell to convince a cynic that an industry in a supposed "free" market, which has been stagnant for decades, is deserving of a shot in the arm, courtesy of the taxpayer. In fact, in all the time alternative energies have been on the table (far longer than one might think -- many of them even longer than gasoline), the most remarkable innovation Detroit has come up with is the alarmingly poor mileage their vehicles seem to get, as though the gas tanks are colanders.

It is with this in mind that some senators, including Republican George Voinovich of Ohio, have attached some provisions to the package. The Washington Post reported yesterday on the Senator's attempts to work the modified deal, saying "That proposal, which was endorsed by the White House, calls for modifying a loan program created to help the automakers develop advanced technologies and retool factories to produce more fuel-efficient vehicles."

Unfortunately, though some provisions ought to be attached to the bill, these are less than impressive. What the automotive industry really needs is a complete overhaul, and a sharp move away from using oil of any kind. Rivals in everywhere from Japan to Brazil to India to European nations have surged ahead of U.S. business in embracing better, cleaner technology -- much of which has been well-known for years in America, but ignored, possibly due to the immense power of the oil industry.

One can't help but think the money might be better spent elsewhere. Just as the much larger bailout of October could have been better-spent bulking up the FDIC and ensuring the protection of the safer, more prudent, middle-American investor, the $25 billion for the auto industry might be better spent exploring newer technologies. Their deportatin of jobs overseas and decreasing benefits to employees should fill taxpayers with enough spite to watch The Big 3 collapse.

As difficult as it is to at once call Toledo my home and allow the industries which have supplied my family with income (my father currently works for Daimler-Chrysler), it is better to replace them than to continue to fund them and attach modest provisos like those proposed by Voinovich. Rather, by putting some of this money toward renewable, non-polluting energies, we might create new jobs, fight pollution, and put America back on the global map of innovation in a field that isn't military.

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