This story was written by Editorial Board, The Pitt News
These days it seems like everybody wants a bailout. The economic crisis has affected every corner of American commerce, from small-business owners to multinational corporations. For the most part, theyve simply had to recoup their losses and soldier on. But one notable exception is the U.S. automobile industry.
With the argument that American automakers are too vital to the national economy to let them go bankrupt, the Big Three General Motors, Ford and Chrysler have appealed to the federal government for help staving off bankruptcy in the face of slipping sales and the prospect of tens of thousands of auto workers without jobs.
And lawmakers appear to be listening. House Speaker Nancy Pelosi has pledged to bring a vote before the House on whether to give the Detroit companies federal funds, and President-elect Barack Obama spoke Monday with President Bush about the same matter.
Unfortunately, what all these people seem to be missing is the fact that, unlike a bailout of the banking industry, bailing out Detroit auto companies isnt a permanent solution. Its barely a solution at all.
Banks deal in the movement and trade of money, so giving them more money to operate is all they need to shore up their operations and get back on stable footing, assuming they wont gamble their loans on risky financial schemes again. But giving the Big Three more money is only a stopgap measure at best that doesnt change the fact that the industry has been in trouble for the last 30 years.
U.S. auto companies simply arent competitive on the world stage anymore, to the point where foreign-made cars outsell American cars everywhere in the world, including in the United States. The rising costs of labor and materials have driven the prices of domestic autos up faster than the competition, and coupled with the sheer volume of cars on the market, the Big Three has slowly but inevitably lost market share and value.
This isnt to say that Detroit makes bad cars, but that its good cars cost more than equally good cars from foreign auto companies, and people generally wont buy a more expensive product of the same quality.
If the government gives these companies bailouts and it looks very likely that it will then lawmakers need to make sure that these companies are going to change their strategies drastically in an effort to stay competitive and turn a profit.
It would be more admirable for the government to take the money and invest it in sustainable, environmentally friendly public transportation systems, alternative energy research and other fields that actually have a chance of benefitting from government funds.
The U.S. auto industry is not unique its just big. The prospect of these companies potentially going bankrupt shouldnt change the principles of capitalism on which the American economy is built, even if it means sacrificing some venerable companies. Businesses go bankrupt all the time for the same reasons; why should these three be any different?