More than a year ago, this column concerned itself with the U.S. government’s bailout of two of the big three U.S. automobile companies ("It Takes a Lot to Laugh, a Bankruptcy to Cry,” July 2009). Most of us will recall that the government fronted $85 billion of taxpayer money to keep GM and Chrysler afloat as the automakers reorganized themselves through bankruptcy. Writing that column gave me pause for a sad and poignant retrospection because I was part of a generation that “grew up thinking GM would never need protection from anything,” much less looming creditors and financial insolvency.
I also had the feeling that bailing out car companies was not part of what government should be doing – that market forces, not political ones, should determine the futures of Chrysler and GM. At the time, I was in favor of a “tough love” policy by the government toward the troubled automakers, believing that the void created by the failure of a U.S. automaker would have been filled by some fledgling automotive company purchasing idled assets at a bargain price and working a new business model from the ground up.
Given the clarity, or rather lack thereof, afforded by hindsight on the program, there is still debate on the efficacy of the bailout. In a recent trip to Michigan, President Obama hailed the bailout (begun under the Bush Administration) as a huge success. He told a group of employees at a Chrysler plant that desperate conditions in the automotive industry left him with “very few choices” on how to handle the crisis. In contrast, critics of the bailout, usually from across the political aisle, argue that government way overstepped the line with its financial foray into the private sector.
We’ll never know what would have happened if the “tough love” policy had played out, and I hope we never have to learn. From what I can gather, strongest support of the bailout program comes from those whose political, professional and financial stakes are most closely tied to it. I, for one, can’t argue with someone whose job was saved by the bailout on the grounds of economic and political theory. I can, however, applaud Ford for keeping itself sufficiently solvent to turn down the government “assistance” the other companies had no choice but to accept.
Moving forward, there are many questions whose answers will determine the future of the U.S. automobile companies. Here are but a few. Has the bailout program saved an industry and the many jobs associated with it, or has it only deferred their eventual, or maybe inevitable, demise? Have the recipients of government support sufficiently changed their production, supply-chain and product-distribution models to avoid a repeat of bankruptcy conditions? Are the U.S. auto companies embracing the energy realities of future decades with vehicles less reliant on hydrocarbon fuels, and will they assume global leadership positions in developing alternative fuel technologies? Have labor and management resolved to set aside their contentious pasts to negotiate contracts that are realistic in a competitive environment?
You probably have questions of your own. If so, we’d love to hear them.