Auto bail-out only responsible choice

Mike Droste/Staff Writer
Strong opinions have been raised over the past month on whether or not to ‘bail-out’, or to provide federal loans to the big three auto manufacturers in the United States-Ford, Chrysler, and GM. With all three companies in financial jeopardy and GM forecasting bankruptcy before we ring in the New Year, a clear course of action must be decided immediately. I believe bailing out the Big Three is the only responsible choice.

The Big Three and their suppliers fuel just under three million jobs in the United States alone. If allowed to go into bankruptcy in our current (poor) economic climate, unemployment would skyrocket, the stock market would take another tumble, and the costs of government assistance (via new unemployment beneficiaries) would actually exceed the cost of the bail-out itself.

Those against a bail-out often bring up the idea that the factories and jobs powered by the Big Three will not just disappear and instead will be bought by competitors. While this is true, it would take a while – perhaps years – for all the jobs to come back. When they do, they will be from overseas automakers that are not nearly as taxable or profitable for the government, and the benefits will be far lower or nonexistent.

Whilst bankruptcy protection is designed to give failing companies a second chance to restructure and reorganize themselves before they cease to exist, it offers nothing for automakers.

While bankruptcy not bode well for auto sales (consumers are reluctant to buy from companies in bankruptcy, because car warranties would be meaningless if the company fell apart), the Big Three’s problem isn’t in their poor corporate structure. They’ve overproduced and are stuck with cars that won’t sell, a problem not helped by going into bankruptcy.

I can say with just as much confidence that although bailing them out is the right thing to do, it isn’t the answer. Giving the automakers money will keep them afloat for a matter of months, and maybe years, but without a better solution they will inevitably come back in the same position.

The United States has had a bigger car problem for decades, and the elephant in the room is our trade agreements.
Japan, for example, has exported over 40 million cars to America since 1975. America has only exported 400,000 in the same period of time. We have over a hundred trade agreements with other nations, the majority of which are much more profitable to the other nations involved.

Because recessions tend to occur across the globe when the United States enters one, other countries will share a joint interest in keeping our country from declining deeper into a recession to protect their own economic concerns, even if it means adjusting pre-existing trade deals.

I believe that a bail-out of the auto industry is necessary, especially in the midst of the worst recession in recent memory. Unless the new administration works to find the underlying cause, however, America will find itself in the same place in 2009.